INVESTMENT:INVESTMENT:PROSPECTS & CHALLENGESPROSPECTS & CHALLENGES

Dr. Yaw PerbiDr. Yaw PerbiCert. (GSE), B.Sc. (Med. sci), M.B., Ch.B.Cert. (GSE), B.Sc. (Med. sci), M.B., Ch.B.

CHAMPIONS CONFERENCE CHAMPIONS CONFERENCE 20072007

University of Cape CoastUniversity of Cape Coast

1313thth April, 2007 April, 2007

BRAIN TEASER!!BRAIN TEASER!!Interest Interest RateRate

Time in Time in YearsYears

$1 One Time$1 One Time

Time in Time in YearsYears

$1 Everyday$1 Everyday

5%5% 284284 100100

10%10% 145145 5656

15%15% 9999 4040

20%20% 7575 3232

? HOW LONG WILL IT TAKE $1 TO ? HOW LONG WILL IT TAKE $1 TO BECOME $1 MILLION AT 0% INTEREST?BECOME $1 MILLION AT 0% INTEREST?

Adapted from Robert Allen’s book Multiple Streams of Income

BRAIN TEASER!!BRAIN TEASER!!

•““It is a wise man who bites It is a wise man who bites into a bone when you give into a bone when you give him an egg”him an egg” (Ghanaian Proverb) (Ghanaian Proverb)

• What does this mean?What does this mean?

OVERVIEWOVERVIEW……• PARABLE ON PARLANCE: PARABLE ON PARLANCE: WHAT IS INVESTMENT?WHAT IS INVESTMENT?

• PLACEMENT: PLACEMENT: WHERE DOES INVESTMENT FIT IN MY LIFE?WHERE DOES INVESTMENT FIT IN MY LIFE?

• PROBLEMS: PROBLEMS: WHAT ARE THE CHALLENGES?WHAT ARE THE CHALLENGES?

• PROSPECTS: PROSPECTS: WHAT ARE THE CHANCES OF FUTURE SUCCESS?WHAT ARE THE CHANCES OF FUTURE SUCCESS?

• PATHWAY: PATHWAY: HOW DO I GO ABOUT INVESTING TODAY?HOW DO I GO ABOUT INVESTING TODAY?

• PARABLE ON PARADISE: PARABLE ON PARADISE: WHAT IS THE ULTIMATE WHAT IS THE ULTIMATE INVESTMENT? INVESTMENT?

PARLANCE & PARABLE: PARLANCE & PARABLE: WHAT IS INVESTMENT…what’s WHAT IS INVESTMENT…what’s

not?not?• Parable of the Ten Minas (Luke 19)Parable of the Ten Minas (Luke 19)

– Investment: “Put this money to work.”Investment: “Put this money to work.”– Making your money work for youMaking your money work for you– And money works HARDER and LONGER than you ever And money works HARDER and LONGER than you ever

can!can!

– Savings and Investment are NOT the same?Savings and Investment are NOT the same?– Savings is putting your money to sleep…Investment is is Savings is putting your money to sleep…Investment is is

giving your money shoes to go out there and work for giving your money shoes to go out there and work for you!you!

– Savings is only a PRECURSOR to investmentSavings is only a PRECURSOR to investment

• The LEAST you could do is SAVE; the BEST The LEAST you could do is SAVE; the BEST you should do is INVEST!you should do is INVEST!

PLACEMENT:PLACEMENT: WHERE DOES INVESTMENT FIT IN MY LIFE?WHERE DOES INVESTMENT FIT IN MY LIFE?

EEMPLOYEEMPLOYEE BBUSINESS USINESS

OWNEROWNER

SSELF-EMPLOYEDELF-EMPLOYED IINVESTORNVESTOR

Adapted from Robert Kiyosaki’s Cashflow Quadrant

BRAIN TEASER!!BRAIN TEASER!!• WHAT COMMON WORD DO YOU FIND IN EACH WHAT COMMON WORD DO YOU FIND IN EACH

OF THESE FOUR CATEGORIES?OF THESE FOUR CATEGORIES?

• ““I have invested large sums of money in many I have invested large sums of money in many different businesses and industries, but I different businesses and industries, but I earned this money in the business which earned this money in the business which represented my definite major purpose, the oil represented my definite major purpose, the oil business.business.

• ““No part of my attention has been given to any No part of my attention has been given to any of the other industries in which I have of the other industries in which I have investments. investments. MyMy capital works for mecapital works for me in those in those industries, but my personal attention has industries, but my personal attention has remained always in my original business i.e. remained always in my original business i.e. the oil business”the oil business” (John D. Rockefeller)(John D. Rockefeller)

PLACEMENT:PLACEMENT: WHERE DOES INVESTMENT FIT IN MY WHERE DOES INVESTMENT FIT IN MY

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PROBLEMS:PROBLEMS:WHAT ARE THE CHALLENGES?WHAT ARE THE CHALLENGES?

• POVERTYPOVERTY– POCKET (MONEY)POCKET (MONEY)– PARADIGMS (MINDSET)PARADIGMS (MINDSET)

• PURPOSEPURPOSE

• PRINCIPLESPRINCIPLES

• PERSONALITYPERSONALITY

• PLAYING FIELDPLAYING FIELD

PROBLEM I:PROBLEM I:POVERTY CHALLENGEPOVERTY CHALLENGE

• POCKET (MONEY)POCKET (MONEY)– In 1990s 50% were poor i.e. lived on less than In 1990s 50% were poor i.e. lived on less than

¢¢900,000/year (GLSS)900,000/year (GLSS)– Current per capita income: $500 vrs. South Korea Current per capita income: $500 vrs. South Korea

$14,000$14,000• (US=$39,000; Norway=$54,000)(US=$39,000; Norway=$54,000)

– ““I don’t have enough to ‘chop;’ how much more to I don’t have enough to ‘chop;’ how much more to invest!” // I’ll invest left-over (surplus)invest!” // I’ll invest left-over (surplus)

• PARADIGMS (MINDSET)PARADIGMS (MINDSET)– ‘‘HIPC’ Mentality (Poverty alleviation vrs. Wealth Creation)HIPC’ Mentality (Poverty alleviation vrs. Wealth Creation)– ““Money matters are for the ‘experts’”Money matters are for the ‘experts’”– Going to school is a guarantee you’ll be richGoing to school is a guarantee you’ll be rich– ‘‘The poorer the purer’The poorer the purer’– ““Valuables” are assetsValuables” are assets– ““I’m from a poor family” ”// “It’s the government”I’m from a poor family” ”// “It’s the government”

PROBLEM II:PROBLEM II:PURPOSE CHALLENGEPURPOSE CHALLENGE

• NO STRONG WHYNO STRONG WHY

• NO S-M-A-R-T FINANCIAL GOALSNO S-M-A-R-T FINANCIAL GOALS

• 5 NEEDS OF LIFE: Link (up with God), 5 NEEDS OF LIFE: Link (up with God), Live, Learn, Love, Leave a good legacyLive, Learn, Love, Leave a good legacy

• NOT ENOUGH!: HIGHER, GOD-GIVEN NOT ENOUGH!: HIGHER, GOD-GIVEN PURPOSE!PURPOSE!

PROBLEM III:PROBLEM III:PRINCIPLES CHALLENGEPRINCIPLES CHALLENGE

• FINANCIAL ILLITERACY: FINANCIAL ILLITERACY: Many important things Many important things in life are not taught in schoolin life are not taught in school– ““Practical money management, savings and Practical money management, savings and

investment is not taught at school, suggesting that investment is not taught at school, suggesting that you can be even be a professor and not have a grip you can be even be a professor and not have a grip over money management and investment” over money management and investment” (Hon. Kwadwo Baah Wiredu, Min. of Education)(Hon. Kwadwo Baah Wiredu, Min. of Education)

• NAIC PRINCIPLESNAIC PRINCIPLES– Invest regularly, regardless of market outlook Invest regularly, regardless of market outlook

Cedi Cost Averaging Cedi Cost Averaging– Reinvest all earnings Reinvest all earnings Law of Compounding (Rule Law of Compounding (Rule

of 72)of 72)– Invest in growth companies Invest in growth companies – Diversify to reduce riskDiversify to reduce risk

PROBLEM IV:PROBLEM IV:PERSONALITY CHALLENGE?PERSONALITY CHALLENGE?

• PATIENCE vrs. Quick Money SyndromePATIENCE vrs. Quick Money Syndrome– Law of Process (Warren Buffet)Law of Process (Warren Buffet)

• MATERIALISM vrs. Secret of the RichMATERIALISM vrs. Secret of the Rich

• CHARACTERCHARACTER– ““Fortune does not change men; it unmasks Fortune does not change men; it unmasks

them.” them.” (Suzanne Necker)(Suzanne Necker)– Character is the container…Character is the container…

• HOLISTICHOLISTIC– Health or wealth?Health or wealth?– ““Best thing you can do for the poor…the worst Best thing you can do for the poor…the worst

you can do to yourself.”you can do to yourself.”

PROBLEM V:PROBLEM V:PLAYING FIELD CHALLENGEPLAYING FIELD CHALLENGE

• Retail/Consumer Banking > Investment Retail/Consumer Banking > Investment

• FEW LDMs in RegionsFEW LDMs in Regions

• Inadequate variety of investment Inadequate variety of investment productsproducts– M-Fund OR E-pack/Horizon/Fortune/Gold FundM-Fund OR E-pack/Horizon/Fortune/Gold Fund

• Immature Bond MarketImmature Bond Market

• Tiny Capital Market Tiny Capital Market – 30 compared with Club 100 or S&P50030 compared with Club 100 or S&P500– Always over subscribedAlways over subscribed

PROSPECTS:PROSPECTS:WHAT ARE THE CHANCESWHAT ARE THE CHANCES

OF FUTURE SUCCESS?OF FUTURE SUCCESS?

• PURCHASING POWER EATERPURCHASING POWER EATER

• PEANUTSPEANUTS

• POVERTY-BREAKERPOVERTY-BREAKER

• PROSPERITYPROSPERITY

• PENSIONPENSION

• POSTERITYPOSTERITY

• PAN AFRICAN INDEPENDENCEPAN AFRICAN INDEPENDENCE

PROSPECT I:PROSPECT I: PURCHASING POWERPURCHASING POWER

• An ‘animal’ that is a Purchasing Power An ‘animal’ that is a Purchasing Power Eater: INFLATIONEater: INFLATION

• ¢¢100,000 in 1990 100,000 in 1990 ¢¢7,000 in 20007,000 in 2000

INVESTMENINVESTMENTT

RETURNS RETURNS (%)(%)

SharesShares 42.5142.51

Treasury BillsTreasury Bills 35.0035.00

US Dollar US Dollar 34.5734.57

1 Year Bonds1 Year Bonds 30.1530.15

Inflation RateInflation Rate 27.3727.37

INVESTMENINVESTMENTT

RETURNS RETURNS (%)(%)

StockStock 10.510.5

Treasury BillsTreasury Bills 3.73.7

Long term Long term BondsBonds

5.25.2

Inflation RateInflation Rate 3.13.1

History of average annual returns in Ghana (1991-2001) and USA (1926-1995)

Courtesy: Databank Courtesy: 70-year Ibboston Study

PROSPECTS II, III, IV:PROSPECTS II, III, IV:PEANUTS…POVERTY-BREAKER..PROSPERITYPEANUTS…POVERTY-BREAKER..PROSPERITY

• PEANUTS ~ PEANUTS ~ Until such time that salaries Until such time that salaries will be worth more than peanuts…will be worth more than peanuts…INVESTMENTINVESTMENT

• POVERTY-BREAKER POVERTY-BREAKER ~ The ONLY way to ~ The ONLY way to WEALTH is on the right side of the QuadrantWEALTH is on the right side of the Quadrant

• PROSPERITY PROSPERITY ~ Having MORE THAN enough~ Having MORE THAN enough

PROSPECTS II, III, IV:PROSPECTS II, III, IV:PEANUTS…POVERTY-BREAKER…PROSPERITYPEANUTS…POVERTY-BREAKER…PROSPERITY

• THE DANIEL OFORI EXAMPLE (2006)THE DANIEL OFORI EXAMPLE (2006)

COMPANYCOMPANY NO. OF NO. OF SHARESSHARES

DIVIDEND DIVIDEND PER SHAREPER SHARE

INCOMEINCOME

GCBGCB(3rd largest with (3rd largest with 6.26%)6.26%)

10,333,97210,333,972 ¢¢550550 ¢¢ 5,683,684,600 5,683,684,600

UNILUNIL(3rd largest with (3rd largest with 5.51%)5.51%)

3,445,6373,445,637 ¢¢1,0501,050 ¢ 3,617,918,850¢ 3,617,918,850

CALCAL(16th largest with (16th largest with 0.37%)0.37%)

591,200591,200 ¢¢7575 ¢¢ 44,340,000 44,340,000

PROSPECT V:PROSPECT V:PENSIONPENSION

• ““Financial independence is the most over-Financial independence is the most over-looked achievement in everyone’s life.” looked achievement in everyone’s life.” (Venita (Venita Vancaspel)Vancaspel)

• In US: For every 100 persons at 65 yearsIn US: For every 100 persons at 65 years– Only 2 are financially independentOnly 2 are financially independent– 23 MUST continue working23 MUST continue working– 75 DEPEND on friends, charity etc.75 DEPEND on friends, charity etc.

• BLAY MACKIN:BLAY MACKIN:– State Sword & Maze BearerState Sword & Maze Bearer– Retired in April 2003 after 44 years as civil servantRetired in April 2003 after 44 years as civil servant– PENSION: 1.2 million; Monthly PENSION: 1.2 million; Monthly ¢¢106,000 for family 106,000 for family

of 7 of 7 ((Joy Headline NewsJoy Headline News, 15, 15thth May 2003) May 2003)

PROSPECTS VI:PROSPECTS VI:POSTERITYPOSTERITY

• ““A good man leaves an inheritance A good man leaves an inheritance for his children’s children”for his children’s children”

• Ford Foundation since 1936 Ford Foundation since 1936 >$100 >$100 million yearly to needy causesmillion yearly to needy causes

FOUNDATIONFOUNDATION ASSETSASSETS

Bill & Melinda GatesBill & Melinda Gates > $ 24 billion> $ 24 billion

The Ford FoundationThe Ford Foundation > $ 9 billion> $ 9 billion

David & Lucile David & Lucile PackardPackard

> $ 6 billion> $ 6 billion

W.K. KelloggW.K. Kellogg > $ 5.5 > $ 5.5 billionbillion

PROSPECT VII:PROSPECT VII:PAN AFRICAN ECONOMIC PAN AFRICAN ECONOMIC

INDEPENDENCEINDEPENDENCE• EGYPTEGYPT– Hidden domestic savings ($241 billion) = Hidden domestic savings ($241 billion) = 55x55x FDI in 20 years FDI in 20 years

(Hernando de Soto)(Hernando de Soto)

• WORLD AID & THE POORWORLD AID & THE POOR– ““The value of savings among the poor is, in fact, immense: forty The value of savings among the poor is, in fact, immense: forty

times all the foreign aid received throughout the world since 1945”times all the foreign aid received throughout the world since 1945”– ““In Haiti, the poorest nation in Latin America, the total assets of the In Haiti, the poorest nation in Latin America, the total assets of the

poor are more than 150 times greater than all the foreign poor are more than 150 times greater than all the foreign investment received since the country’s independence from France investment received since the country’s independence from France in 1804”in 1804”

– ““If the United States were to hike its foreign-aid budget to the level If the United States were to hike its foreign-aid budget to the level recommended by the United Nations—0.7 per cent of national recommended by the United Nations—0.7 per cent of national income—it would take the richest country on earth [i.e. America] income—it would take the richest country on earth [i.e. America] more than 150 years to transfer to the world’s poor resources more than 150 years to transfer to the world’s poor resources equal to those that they already possess.” equal to those that they already possess.” (Hernando de Soto)(Hernando de Soto)

• ACRES OF DIAMONDSACRES OF DIAMONDS

PATHWAY:PATHWAY:HOW DO I GO ABOUT INVESTING HOW DO I GO ABOUT INVESTING

TODAY?TODAY?• Resolve not to be poor! Value every cedi!Resolve not to be poor! Value every cedi!

• Start Start 10/10/8010/10/80 TODAY! TODAY!

• Be consistent; think LONG term!Be consistent; think LONG term!

• Invest in investment knowledgeInvest in investment knowledge

• Start an Investment ClubStart an Investment Club– Build an investment culture~regular habitBuild an investment culture~regular habit– Learn-by-doing investmentLearn-by-doing investment– Learn-and-earn over time while having fun!Learn-and-earn over time while having fun!

• Go to Databank on MondayGo to Databank on Monday

• SDC Campus Mutual Fund is here!SDC Campus Mutual Fund is here!

PARABLE ON PARADISE:PARABLE ON PARADISE:WHAT IS THE ULTIMATE INVESTMENT?WHAT IS THE ULTIMATE INVESTMENT?

• The young, ambitious graduate & the old manThe young, ambitious graduate & the old man– ……AND THEN WHAT?AND THEN WHAT?

• ……I’ll say to myself, “You have plenty of good I’ll say to myself, “You have plenty of good things laid up for many years. Take life easy: things laid up for many years. Take life easy: eat, drink and be merry.”eat, drink and be merry.”

• ““But God said to him, “You fool! This very night But God said to him, “You fool! This very night your life will be demanded from you. Then who your life will be demanded from you. Then who will get what you have prepared for yourself?”will get what you have prepared for yourself?”

• ““This is how it will be with anyone who stores This is how it will be with anyone who stores up things for himself but is not rich toward up things for himself but is not rich toward God.” God.” (Luke 12:19-21)(Luke 12:19-21)

CONCLUSION:CONCLUSION:

“SEE YOU ON THE“SEE YOU ON THEGOLF COURSEGOLF COURSE

ON MONDAY MORNING!”ON MONDAY MORNING!”

“SEE YOU IN YOUR“SEE YOU IN YOURGRAND MANSIONGRAND MANSION

ON THE OTHER SIDE OF THE ON THE OTHER SIDE OF THE JORDAN!”JORDAN!”

THANK YOU!!