We all want to work less and still earn more money to pay our monthly bills. This is a dream everyone looks forward to as one inch closer to retiring age but the hard truth is your savings in the bank is the least asset to make that a reality. In this guide, I’d help you scale the hurdle using my personal investing experience.
Since the beginning of the year, I had deliberately tried and tested the idea of investing for a living just to see if it’s actually workable and from my discovery, this isn’t rocket science.
We live in a country where inflation is the biggest threat to savings and pension isn’t in any way considered reliable sources of income for retirees. The only way to stay afloat outside your 9-5 job is to build an investment portfolio you can start living off.
Here are few simple steps you can take to put yourself in a better position as Nigeria investor:
Estimate your annual expenses
How much do you spend on personal and/or family upkeep per month? This is a basic question you need to provide an answer to and it’s so funny that a lot of folks ignore this figure. Understanding your monthly expenses lets you plan your expected income so you’d know whether you need to do more or are already within your standard of living.
Let”s say Mr A is a full time investor who gives his wife N40,000 for family upkeep and save N30,000 to meet unforeseen expenses, that’s like N70,000 per month or N840,000 per year. If we factor in àn average annual rental payment of N600,000 depending on where he lives in Lagos, we’d have a realistic cost of living that hovers around N1,440,000 per annum.
Do your calculation and estimate how much you should earn per year to sustain your income?
Use the current inflation numbers to calculate your expected annual return on investment.
Like I said earlier, the number one enemy of your finance is inflation and if you are yet to come up with a road map on how to beat the inflation numbers year on year, you may not perfect the act of investing money. Inflation rate as of this analysis is 13.77% and if our goal is to generate an annual return that is above inflation, then it’s safer to go for an expected annual return of 20% – Pro-rate 20% on a 12 month period, that’s like 1.66% or approximately 2% per month.
Estimate your minimum investment capital
It’s so funny when people try to make a living off their investment without going through the first and second steps, they just want to invest N50,000, N100,000, N200,000 or even N1,000,000 then sit back and wait for a monthly alert. The simple fact is that if you are ready to start investing for a living, then you need to know how much is actually right for you to get started or your minimum investible capital.
For Mr A, his average annual expenses is N1,440,000 and if he wants to earn 20% return per annum, then his minimum investible capital is N1,440,000 divided by 20% which is N7,200,000.
You can use this to estimate your minimum investment capital; divided your annual expenses by 20%, then assess your current portfolio.
From this analysis, you need to earn an average monthly return of 1.66% per month on the N7,200,000 to live off your investment – N120,240 – N144,000 per month.
What’s the best investment mix for 1.66% – 2% monthly return?
We’d be splitting our investment portfolio of N7,200,000 into three – dividend income, interest income and trading income.
Dividend Investing income: We will invest N2,160,000 (30% of N7,200,00) in dividend stocks that offer yield above 14%. Stocks like Zenith, UBA and UCAP have earned its shareholders an average of 14% in the last 3 years. Your annual dividend income is N302, 400 (14% of N2,160,000)
Interest Income: We will invest N3,600,000 (50% of N7,200,00) in reliable agric-tech opportunities with a track record of payments and defensive business model. On average, I earn a minimum of 2-2.4% per month on my agric-tech investments which is equivalent to N864,000 per annum (24% of N3,600,000)
Stock Trading Income: We’ll invest N1,440,000 (20% of N7,200,000) in the stock market using a swing trading strategy. So I’d advise you put the rest of the 20% in fast-growing stocks that are posting at least 15-20% growth in sales and earnings. While some stocks can deliver more 50% or even 70% per annum, we can maintain a modest and achievable annual ROI of 20% on our N1,440,000 (N288,000).
Let’s add the total annual profit on our portfolio: N302,400+N864,000+N288,000 = N1,454,400 or N121,200 per month.
This is exactly what Mr A needs to do to sustain his cost of living and the interesting thing is that he can save N20,000 on the N30,000 monthly expense in case there are no unforeseen expenses which translate to an excess of N240,000 personal retained earnings per annum.
In summary, you will notice that the investment opportunities mentioned here is available and within the reach of anyone – dividend investing, agric-tech opportunities and US stock market trading.
While these are my strategy to earn a living off your investment, I’d advise you do your due diligence to find what works for you.
This is an eye opener. Thanks Oge.
Thank you so much, Sir… I appreciate your honest feedback.
Thank you Oge for the financial literacy you frequently provide to the public
Insightful writeup. Well done.
Please I need information on the trusted agritech businesses you referred to.
Kindly recommended genuine Agric-TECH investment opportunities to me. I am interested. Thanks
Please recommend Agric tech investment opportunities
I will an update soon!
It is an interesting piece for guys in active service and those nearing retirement.
Good read and very informative, always a pleasure reading your article, more grace chief
Great piece Oge. Thanks! You didn’t take into consideration the fees, mostly hidden fees charged by stockbrokers. How about taxation? Withholding tax, value added tax the investor would have to part with?
Thank you for the feedback Sir, I think the fee isn’t significant enough to drawdown your return.
Insightful write up, but getting a good fintech agricultural company is scarce
i need trusted Agric-tech to invest with.
Very informative, highly educative. Thank you for sharing.
This is an eye-opening and a recommended piece for everyone desiring to know how best to allocate assets and earn income passively both in the immediate and future time.
Agric-tech is fast becoming an asset class of choice for retail investors for two reasons: it helps you earn regular and reasonably higher fixed returns more than what you get from the traditional fixed-income investments. Secondly, it offers a relative level of safety of investment due to the agric insurance cover that many of them take on their farm projects.