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Why investing in the NSE is fool's gold and a waste
mv_ufanisi
#1 Posted : Saturday, December 08, 2018 12:15:22 AM
Rank: Member


Joined: 1/15/2010
Posts: 516
Why investing in the NSE is a waste of your intellect and money and is the Kenyan reincarnation of "fool's gold"

definition:
fool's gold is also known as pyrite iron, fool's gold is a gold-colored mineral that is often mistaken for real gold but has no value

1. Your investment is subject to the whims of the market and a lot of factors outside your control. If it was your small business facing these challenges at least you have the opportunity to deal with the problems yourself or talk to that resourceful friend that could sort you out. At the NSE you have to stand on the sidelines and wring your hands as management fumbles with simple things that you would know how to deal with.

2. You will get a false sense of achievement. Naturally when the market goes up you will be on a false high. You won't understand why you were successful, preparing you to make large mistakes in the future. Your high will be more similar to that of a gambler than that of a business owner who has acquired real knowledge and experience.

3. You are entrusting your money with management in an environment of low trust and poor law enforcement. How many NSE companies have had corrupt management? It doesn't even matter if the company is doing well or not. Your company could be in a great industry where it should be making a lot of profits but management finds a way to steal the value from you in the form of bonuses, side deals and tenders to related parties etc. There are many companies in the NSE where management has done very well for themselves in the last 5 years while shareholders have lost value.

4. We as a continent are not there yet. We have very few companies listed in African stock markets precisely because we have too few companies in Africa. We are in an time period where we are called to be pioneers and build companies, yet unfortunately most of us have been educated using a syllabus suited for the developed world Wall Street BS. Your situation as an African if you look towards the West or specifically the US for inspiration should be more similar to the pioneers who first immigrated to the United States of America and had to build everything from scratch. That is where most African countries are. Not Wall Street level! The smart person is the one that can tell the difference.

5. It's a poor investment. You are much better off putting your hard earned money in CBK treasury bills and bonds and getting 9%-10% a year than losing 40%-60% of it in the NSE. If you want unlimited upside possibility take a small percentage of your assets say 10% and either start a small company or fund one where you have the ability to use your intellect, connections and money to grow the value of your investment. Worst case if you lose the 10% you still have the 90% of your assets intact.

6. You will waste your time and intellect analyzing the NSE than using it to solve society's problems and generate wealth for yourself. There are brilliant people on Wazua with great intellect and insights but unfortunately that is wasted because they are not able to implement their ideas. That intellect would generate a lot more return solving problems in a small company.

That is why a few years ago, I sold all my NSE equity, started a company in stead and made a lot lot more return for myself while creating much needed jobs in the economy.
obiero
#2 Posted : Saturday, December 08, 2018 4:10:25 AM
Rank: Elder


Joined: 6/23/2009
Posts: 10,937
Location: nairobi
@mv_ufanisi you have a point, the NSE is riddled with too many corrupt firms. I happen to know the inside of boards in many of the companies and I would not trust them to hold my spectacles, let alone hard earned cash.. Only 13 solid firms are investable, with proper management and promise of reasonable prospects for sizable ROI or at worst, negligible loss
1.KCB
2.KQ
3.BAT
4.Co-op
5.Safaricom
6 Equity
7.DTB
8.Jubilee
9.PAFR
10.TPSEA
11.BK
12.KEGN
13.TOTAL
DISCLAIMER: @obiero, MBA-MIS, CISA. Opinionated, owner of www.winda.co.ke. Aims to be factual
the deal
#3 Posted : Saturday, December 08, 2018 4:34:55 AM
Rank: Elder


Joined: 9/25/2009
Posts: 4,420
Location: Windhoek/Nairobbery
mv_ufanisi wrote:
Why investing in the NSE is a waste of your intellect and money and is the Kenyan reincarnation of "fool's gold"

definition:
fool's gold is also known as pyrite iron, fool's gold is a gold-colored mineral that is often mistaken for real gold but has no value

1. Your investment is subject to the whims of the market and a lot of factors outside your control. If it was your small business facing these challenges at least you have the opportunity to deal with the problems yourself or talk to that resourceful friend that could sort you out. At the NSE you have to stand on the sidelines and wring your hands as management fumbles with simple things that you would know how to deal with.

2. You will get a false sense of achievement. Naturally when the market goes up you will be on a false high. You won't understand why you were successful, preparing you to make large mistakes in the future. Your high will be more similar to that of a gambler than that of a business owner who has acquired real knowledge and experience.

3. You are entrusting your money with management in an environment of low trust and poor law enforcement. How many NSE companies have had corrupt management? It doesn't even matter if the company is doing well or not. Your company could be in a great industry where it should be making a lot of profits but management finds a way to steal the value from you in the form of bonuses, side deals and tenders to related parties etc. There are many companies in the NSE where management has done very well for themselves in the last 5 years while shareholders have lost value.

4. We as a continent are not there yet. We have very few companies listed in African stock markets precisely because we have too few companies in Africa. We are in an time period where we are called to be pioneers and build companies, yet unfortunately most of us have been educated using a syllabus suited for the developed world Wall Street BS. Your situation as an African if you look towards the West or specifically the US for inspiration should be more similar to the pioneers who first immigrated to the United States of America and had to build everything from scratch. That is where most African countries are. Not Wall Street level! The smart person is the one that can tell the difference.

5. It's a poor investment. You are much better off putting your hard earned money in CBK treasury bills and bonds and getting 9%-10% a year than losing 40%-60% of it in the NSE. If you want unlimited upside possibility take a small percentage of your assets say 10% and either start a small company or fund one where you have the ability to use your intellect, connections and money to grow the value of your investment. Worst case if you lose the 10% you still have the 90% of your assets intact.

6. You will waste your time and intellect analyzing the NSE than using it to solve society's problems and generate wealth for yourself. There are brilliant people on Wazua with great intellect and insights but unfortunately that is wasted because they are not able to implement their ideas. That intellect would generate a lot more return solving problems in a small company.

That is why a few years ago, I sold all my NSE equity, started a company in stead and made a lot lot more return for myself while creating much needed jobs in the economy.



Long post but you are 100% wrong here...


Alot of people on wazua or at the NSE are business people or politicians... Your MPs... Almost all CEOs of listed companies come here...


Some people prefer to invest in mature businesses instead of start ups

Start ups are more risky compared to the NSE...


Conclusion :" you are wrong please deleted this post...


NSE is not for everyone...
Cde Monomotapa
#4 Posted : Saturday, December 08, 2018 7:00:40 AM
Rank: Chief


Joined: 1/13/2011
Posts: 5,962
mv_ufanisi wrote:
Why investing in the NSE is a waste of your intellect and money and is the Kenyan reincarnation of "fool's gold"

definition:
fool's gold is also known as pyrite iron, fool's gold is a gold-colored mineral that is often mistaken for real gold but has no value

1. Your investment is subject to the whims of the market and a lot of factors outside your control. If it was your small business facing these challenges at least you have the opportunity to deal with the problems yourself or talk to that resourceful friend that could sort you out. At the NSE you have to stand on the sidelines and wring your hands as management fumbles with simple things that you would know how to deal with.

2. You will get a false sense of achievement. Naturally when the market goes up you will be on a false high. You won't understand why you were successful, preparing you to make large mistakes in the future. Your high will be more similar to that of a gambler than that of a business owner who has acquired real knowledge and experience.

3. You are entrusting your money with management in an environment of low trust and poor law enforcement. How many NSE companies have had corrupt management? It doesn't even matter if the company is doing well or not. Your company could be in a great industry where it should be making a lot of profits but management finds a way to steal the value from you in the form of bonuses, side deals and tenders to related parties etc. There are many companies in the NSE where management has done very well for themselves in the last 5 years while shareholders have lost value.

4. We as a continent are not there yet. We have very few companies listed in African stock markets precisely because we have too few companies in Africa. We are in an time period where we are called to be pioneers and build companies, yet unfortunately most of us have been educated using a syllabus suited for the developed world Wall Street BS. Your situation as an African if you look towards the West or specifically the US for inspiration should be more similar to the pioneers who first immigrated to the United States of America and had to build everything from scratch. That is where most African countries are. Not Wall Street level! The smart person is the one that can tell the difference.

5. It's a poor investment. You are much better off putting your hard earned money in CBK treasury bills and bonds and getting 9%-10% a year than losing 40%-60% of it in the NSE. If you want unlimited upside possibility take a small percentage of your assets say 10% and either start a small company or fund one where you have the ability to use your intellect, connections and money to grow the value of your investment. Worst case if you lose the 10% you still have the 90% of your assets intact.

6. You will waste your time and intellect analyzing the NSE than using it to solve society's problems and generate wealth for yourself. There are brilliant people on Wazua with great intellect and insights but unfortunately that is wasted because they are not able to implement their ideas. That intellect would generate a lot more return solving problems in a small company.

That is why a few years ago, I sold all my NSE equity, started a company in stead and made a lot lot more return for myself while creating much needed jobs in the economy.


Applause
mv_ufanisi
#5 Posted : Saturday, December 08, 2018 7:27:45 AM
Rank: Member


Joined: 1/15/2010
Posts: 516
the deal wrote:
mv_ufanisi wrote:
Why investing in the NSE is a waste of your intellect and money and is the Kenyan reincarnation of "fool's gold"

definition:
fool's gold is also known as pyrite iron, fool's gold is a gold-colored mineral that is often mistaken for real gold but has no value

1. Your investment is subject to the whims of the market and a lot of factors outside your control. If it was your small business facing these challenges at least you have the opportunity to deal with the problems yourself or talk to that resourceful friend that could sort you out. At the NSE you have to stand on the sidelines and wring your hands as management fumbles with simple things that you would know how to deal with.

2. You will get a false sense of achievement. Naturally when the market goes up you will be on a false high. You won't understand why you were successful, preparing you to make large mistakes in the future. Your high will be more similar to that of a gambler than that of a business owner who has acquired real knowledge and experience.

3. You are entrusting your money with management in an environment of low trust and poor law enforcement. How many NSE companies have had corrupt management? It doesn't even matter if the company is doing well or not. Your company could be in a great industry where it should be making a lot of profits but management finds a way to steal the value from you in the form of bonuses, side deals and tenders to related parties etc. There are many companies in the NSE where management has done very well for themselves in the last 5 years while shareholders have lost value.

4. We as a continent are not there yet. We have very few companies listed in African stock markets precisely because we have too few companies in Africa. We are in an time period where we are called to be pioneers and build companies, yet unfortunately most of us have been educated using a syllabus suited for the developed world Wall Street BS. Your situation as an African if you look towards the West or specifically the US for inspiration should be more similar to the pioneers who first immigrated to the United States of America and had to build everything from scratch. That is where most African countries are. Not Wall Street level! The smart person is the one that can tell the difference.

5. It's a poor investment. You are much better off putting your hard earned money in CBK treasury bills and bonds and getting 9%-10% a year than losing 40%-60% of it in the NSE. If you want unlimited upside possibility take a small percentage of your assets say 10% and either start a small company or fund one where you have the ability to use your intellect, connections and money to grow the value of your investment. Worst case if you lose the 10% you still have the 90% of your assets intact.

6. You will waste your time and intellect analyzing the NSE than using it to solve society's problems and generate wealth for yourself. There are brilliant people on Wazua with great intellect and insights but unfortunately that is wasted because they are not able to implement their ideas. That intellect would generate a lot more return solving problems in a small company.

That is why a few years ago, I sold all my NSE equity, started a company in stead and made a lot lot more return for myself while creating much needed jobs in the economy.



Long post but you are 100% wrong here...


Alot of people on wazua or at the NSE are business people or politicians... Your MPs... Almost all CEOs of listed companies come here...


Some people prefer to invest in mature businesses instead of start ups

Start ups are more risky compared to the NSE...


Conclusion :" you are wrong please deleted this post...


NSE is not for everyone...


I know what I'm talking about because I've been there, done that.

I used to be one of those suckers who would read company Annual Reports from cover to cover, scrutinize financial statements, attend AGMs and the like, watch the NSE Trades like a hawk, spend time crawling Wazua posts, all in an effort to improve my stock picking.

Now as a small business owner, I might have a meeting to think about how to provide better services to our customers and by the end I will improve aspects of product which usually leads to an increase in revenues.

The same amount of effort I was using on the NSE, put into my business gives me a lot more return and I'm getting better and better at running my business which will lead to more value in the future.

I'm gaining real knowledge and skills while creating jobs, paying taxes, solving important needs in the society while making much more than I would have made at the NSE.

The NSE is a lot more risky than a start up in my honest opinion. The hidden risk is that your NSE company is being run by other people who could steal your value and you have nothing really to do about it, you are also missing out on the opportunity to deploy your intellect and hard work to improve your outcome and learn about the real world by creating a new company or funding a new company with a team that you believe in and have real influence over.
tom_boy
#6 Posted : Saturday, December 08, 2018 8:27:37 AM
Rank: Member


Joined: 2/20/2007
Posts: 532
Both wrong and right. To each his own.

However, most new businesses fail by the 3rd to 5th yr. Thats why its so hard to get any funding for new business. You must first show that it is profitable.

Hardly anyone invests in the stock market as their primary source of income. So you are the fool to have tried doing that. Otherwise stop lying to us that you are applying the same effort applied to the nse now converted to your business.

All markets are cyclical and subject to the emotions of the time, not just the NSE.

Good luck with your business but stop lying to us that the same effort you apply to your business is the same effort you applied picking stocks, coz that makes stock picking a full time biz for you at the time thus making you the fool. ( repetition for emphasis).

Research shows that over the long term, stock market outperforms all other forms of investment. Challenge is that we have no data on how many new businesses were started in last 10-15yrs and what is the cummulative growth or lack of growth from those businesses. So comparing a single business to the NSE is not correct.

They must find it difficult....... those who have taken authority as the truth, rather than truth as the authority. -G. Massey.
Ericsson
#7 Posted : Saturday, December 08, 2018 10:04:04 AM
Rank: Elder


Joined: 12/4/2009
Posts: 5,965
Location: NAIROBI
tom_boy wrote:
Both wrong and right. To each his own.

However, most new businesses fail by the 3rd to 5th yr. Thats why its so hard to get any funding for new business. You must first show that it is profitable.

Hardly anyone invests in the stock market as their primary source of income. So you are the fool to have tried doing that. Otherwise stop lying to us that you are applying the same effort applied to the nse now converted to your business.

All markets are cyclical and subject to the emotions of the time, not just the NSE.

Good luck with your business but stop lying to us that the same effort you apply to your business is the same effort you applied picking stocks, coz that makes stock picking a full time biz for you at the time thus making you the fool. ( repetition for emphasis).

Research shows that over the long term, stock market outperforms all other forms of investment. Challenge is that we have no data on how many new businesses were started in last 10-15yrs and what is the cummulative growth or lack of growth from those businesses. So comparing a single business to the NSE is not correct.


Very strong point tom_boy.
Nse is not for everyone same as running a business isn't for everyone
mv_ufanisi
#8 Posted : Saturday, December 08, 2018 10:11:20 AM
Rank: Member


Joined: 1/15/2010
Posts: 516
tom_boy wrote:
Both wrong and right. To each his own.

However, most new businesses fail by the 3rd to 5th yr. Thats why its so hard to get any funding for new business. You must first show that it is profitable.

Hardly anyone invests in the stock market as their primary source of income. So you are the fool to have tried doing that. Otherwise stop lying to us that you are applying the same effort applied to the nse now converted to your business.

All markets are cyclical and subject to the emotions of the time, not just the NSE.

Good luck with your business but stop lying to us that the same effort you apply to your business is the same effort you applied picking stocks, coz that makes stock picking a full time biz for you at the time thus making you the fool. ( repetition for emphasis).

Research shows that over the long term, stock market outperforms all other forms of investment. Challenge is that we have no data on how many new businesses were started in last 10-15yrs and what is the cummulative growth or lack of growth from those businesses. So comparing a single business to the NSE is not correct.



Your statement

"Research shows that over the long term, stock market outperforms all other forms of investment."

above needs to be analyzed for accuracy because it is quite misleading.

Does the stock market referenced in the above statement refer to the Nairobi Stock Exchange, Nigeria Stock Exchange, the NASDAQ, DOW or other stock market? Because those are not the same "animals".

Has there any research being done to show that in Kenya, the NSE has been a net accumulator of wealth compared to other options?

Over the last 10 years, the NSE has been a net capital destroyer with the NSE Index going from 3000 to 2819, while the boring but slow and steady CBK bills and bonds would have returned a 10% annual interest which compounded over 10 years would have returned more than 2.5X

Even in the USA, among millionaire households, 50% of them are business owners according to research in the widely acclaimed book "The Millionaire Next Door."

sparkly
#9 Posted : Saturday, December 08, 2018 10:44:39 AM
Rank: Elder


Joined: 9/23/2009
Posts: 6,552
Location: Enk are Nyirobi
1. @mv-fanisi your observations help to debunk stock investment myths. It is surprising that you had to go through all that experience to learn your lessons which you could have picked from basic business education text book.

2. There are three basic ways to make money: sell your labour (employment); run a business; or economic rents.

3. Employment is straight forward. You sell your services to one customer (your employer) who takes care for other factors of production ie land, labour, capital goods and entrepreneurship.

4. As a businessman, whether selling goods or services, you organize the factors of production to make money. A stocks dealer or broker is a businessman. He makes money in all market conditions but the quantum is determined by his skills as an entreprenuer.

5. Economic rents arise from passive investment of property, liquid and illiquid. You can rent out your house for a monthly income. You can license out a patented idea to manufacturers. Bank savings are money rented out to businesses and consumers through the bank as an intermediary. T-Bills are money rented out to government to provide public services. Stock investment is money rented out to businesses with a right to residual income of the business.

6. All the three sources of income have levels of risk and reward. e.g your can get fired from employment, your business can fail, the banks/goverment can go bust and the stock investment company may not have residual income to distribute.

7. Back to your experience. If you wanted to make sure money from stocks trading, you should have obtained a dealer's/ brokerage/ Financial Manager/Agency license and put in the time and resources.

8. T-Bills and stocks are in the same category of passive rental investments. You need a substantial outlay to make meaningful income from both. If you don't have the means, you make the money from employment and business to invest in T-Bills and stocks.
Life is short. Live passionately.
Monk
#10 Posted : Saturday, December 08, 2018 11:53:36 AM
Rank: Member


Joined: 7/1/2009
Posts: 51
obiero wrote:
@mv_ufanisi you have a point, the NSE is riddled with too many corrupt firms. I happen to know the inside of boards in many of the companies and I would not trust them to hold my spectacles, let alone hard earned cash.. Only 13 solid firms are investable, with proper management and promise of reasonable prospects for sizable ROI or at worst, negligible loss
1.KCB
2.KQ
3.BAT
4.Co-op
5.Safaricom
6 Equity
7.DTB
8.Jubilee
9.PAFR
10.TPSEA
11.BK
12.KEGN
13.TOTAL


@Obiero you have a wicked sense of humour Laughing out loudly
Monk
#11 Posted : Saturday, December 08, 2018 12:07:26 PM
Rank: Member


Joined: 7/1/2009
Posts: 51
mv_ufanisi wrote:
the deal wrote:
mv_ufanisi wrote:
Why investing in the NSE is a waste of your intellect and money and is the Kenyan reincarnation of "fool's gold"

definition:
fool's gold is also known as pyrite iron, fool's gold is a gold-colored mineral that is often mistaken for real gold but has no value

1. Your investment is subject to the whims of the market and a lot of factors outside your control. If it was your small business facing these challenges at least you have the opportunity to deal with the problems yourself or talk to that resourceful friend that could sort you out. At the NSE you have to stand on the sidelines and wring your hands as management fumbles with simple things that you would know how to deal with.

2. You will get a false sense of achievement. Naturally when the market goes up you will be on a false high. You won't understand why you were successful, preparing you to make large mistakes in the future. Your high will be more similar to that of a gambler than that of a business owner who has acquired real knowledge and experience.

3. You are entrusting your money with management in an environment of low trust and poor law enforcement. How many NSE companies have had corrupt management? It doesn't even matter if the company is doing well or not. Your company could be in a great industry where it should be making a lot of profits but management finds a way to steal the value from you in the form of bonuses, side deals and tenders to related parties etc. There are many companies in the NSE where management has done very well for themselves in the last 5 years while shareholders have lost value.

4. We as a continent are not there yet. We have very few companies listed in African stock markets precisely because we have too few companies in Africa. We are in an time period where we are called to be pioneers and build companies, yet unfortunately most of us have been educated using a syllabus suited for the developed world Wall Street BS. Your situation as an African if you look towards the West or specifically the US for inspiration should be more similar to the pioneers who first immigrated to the United States of America and had to build everything from scratch. That is where most African countries are. Not Wall Street level! The smart person is the one that can tell the difference.

5. It's a poor investment. You are much better off putting your hard earned money in CBK treasury bills and bonds and getting 9%-10% a year than losing 40%-60% of it in the NSE. If you want unlimited upside possibility take a small percentage of your assets say 10% and either start a small company or fund one where you have the ability to use your intellect, connections and money to grow the value of your investment. Worst case if you lose the 10% you still have the 90% of your assets intact.

6. You will waste your time and intellect analyzing the NSE than using it to solve society's problems and generate wealth for yourself. There are brilliant people on Wazua with great intellect and insights but unfortunately that is wasted because they are not able to implement their ideas. That intellect would generate a lot more return solving problems in a small company.

That is why a few years ago, I sold all my NSE equity, started a company in stead and made a lot lot more return for myself while creating much needed jobs in the economy.



Long post but you are 100% wrong here...


Alot of people on wazua or at the NSE are business people or politicians... Your MPs... Almost all CEOs of listed companies come here...


Some people prefer to invest in mature businesses instead of start ups

Start ups are more risky compared to the NSE...


Conclusion :" you are wrong please deleted this post...


NSE is not for everyone...


I know what I'm talking about because I've been there, done that.

I used to be one of those suckers who would read company Annual Reports from cover to cover, scrutinize financial statements, attend AGMs and the like, watch the NSE Trades like a hawk, spend time crawling Wazua posts, all in an effort to improve my stock picking.

Now as a small business owner, I might have a meeting to think about how to provide better services to our customers and by the end I will improve aspects of product which usually leads to an increase in revenues.

The same amount of effort I was using on the NSE, put into my business gives me a lot more return and I'm getting better and better at running my business which will lead to more value in the future.

I'm gaining real knowledge and skills while creating jobs, paying taxes, solving important needs in the society while making much more than I would have made at the NSE.

The NSE is a lot more risky than a start up in my honest opinion. The hidden risk is that your NSE company is being run by other people who could steal your value and you have nothing really to do about it, you are also missing out on the opportunity to deploy your intellect and hard work to improve your outcome and learn about the real world by creating a new company or funding a new company with a team that you believe in and have real influence over.


I've been in business for nearly 20 years, and the NSE for 13 years. I've made gains and losses in both places.

You point out the NSE risks but fail to also point out the risks of doing business in Kenya. Perhaps you should familiarize yourself with statistics on the failure rate of businesses in Kenya.

The current regulatory environment is wrecking havoc in many businesses that depend on imports, with some having to abandon shipments at the ICD due to ridiculous demurrage/storage charges. Performance by the blue chip Corporates is also affected, as you've seen from profit warnings over the last two years. Believe me, some years, I've had terrible performance in business, so it's not as rosy as you paint it.
Monk
#12 Posted : Saturday, December 08, 2018 12:28:04 PM
Rank: Member


Joined: 7/1/2009
Posts: 51
sparkly wrote:
1. @mv-fanisi your observations help to debunk stock investment myths. It is surprising that you had to go through all that experience to learn your lessons which you could have picked from basic business education text book.

2. There are three basic ways to make money: sell your labour (employment); run a business; or economic rents.

3. Employment is straight forward. You sell your services to one customer (your employer) who takes care for other factors of production ie land, labour, capital goods and entrepreneurship.

4. As a businessman, whether selling goods or services, you organize the factors of production to make money. A stocks dealer or broker is a businessman. He makes money in all market conditions but the quantum is determined by his skills as an entreprenuer.

5. Economic rents arise from passive investment of property, liquid and illiquid. You can rent out your house for a monthly income. You can license out a patented idea to manufacturers. Bank savings are money rented out to businesses and consumers through the bank as an intermediary. T-Bills are money rented out to government to provide public services. Stock investment is money rented out to businesses with a right to residual income of the business.

6. All the three sources of income have levels of risk and reward. e.g your can get fired from employment, your business can fail, the banks/goverment can go bust and the stock investment company may not have residual income to distribute.

7. Back to your experience. If you wanted to make sure money from stocks trading, you should have obtained a dealer's/ brokerage/ Financial Manager/Agency license and put in the time and resources.

8. T-Bills and stocks are in the same category of passive rental investments. You need a substantial outlay to make meaningful income from both. If you don't have the means, you make the money from employment and business to invest in T-Bills and stocks.


There is no risk-free investment option;

1. Fixed deposits can be raided by the government, as happened in Cyprus at the height of their debt crisis.

2. Default on Corporate Bonds has happened many times here in Kenya. In Cyprus and Greece, Treasury Bonds holder lost a significant percentage of their capital during the debt crisis in those countries.

3. Some countries even raided pension funds when faced with debt crisis

4. Many businesses in Kenya are getting decimated by the regulatory environment.

5. Real Estate investments also occasionally take a hit; market conditions, corruption (lands registry), greedy banks, natural disasters etc


The lesson I learned is to embrace diversification to avoid a wipeout from a single event.

Enuma Elish
#13 Posted : Sunday, December 09, 2018 8:36:03 AM
Rank: New-farer


Joined: 6/5/2014
Posts: 44
mv_ufanisi wrote:
Why investing in the NSE is a waste of your intellect and money and is the Kenyan reincarnation of "fool's gold"

definition:
fool's gold is also known as pyrite iron, fool's gold is a gold-colored mineral that is often mistaken for real gold but has no value

1. Your investment is subject to the whims of the market and a lot of factors outside your control. If it was your small business facing these challenges at least you have the opportunity to deal with the problems yourself or talk to that resourceful friend that could sort you out. At the NSE you have to stand on the sidelines and wring your hands as management fumbles with simple things that you would know how to deal with.

2. You will get a false sense of achievement. Naturally when the market goes up you will be on a false high. You won't understand why you were successful, preparing you to make large mistakes in the future. Your high will be more similar to that of a gambler than that of a business owner who has acquired real knowledge and experience.

3. You are entrusting your money with management in an environment of low trust and poor law enforcement. How many NSE companies have had corrupt management? It doesn't even matter if the company is doing well or not. Your company could be in a great industry where it should be making a lot of profits but management finds a way to steal the value from you in the form of bonuses, side deals and tenders to related parties etc. There are many companies in the NSE where management has done very well for themselves in the last 5 years while shareholders have lost value.

4. We as a continent are not there yet. We have very few companies listed in African stock markets precisely because we have too few companies in Africa. We are in an time period where we are called to be pioneers and build companies, yet unfortunately most of us have been educated using a syllabus suited for the developed world Wall Street BS. Your situation as an African if you look towards the West or specifically the US for inspiration should be more similar to the pioneers who first immigrated to the United States of America and had to build everything from scratch. That is where most African countries are. Not Wall Street level! The smart person is the one that can tell the difference.

5. It's a poor investment. You are much better off putting your hard earned money in CBK treasury bills and bonds and getting 9%-10% a year than losing 40%-60% of it in the NSE. If you want unlimited upside possibility take a small percentage of your assets say 10% and either start a small company or fund one where you have the ability to use your intellect, connections and money to grow the value of your investment. Worst case if you lose the 10% you still have the 90% of your assets intact.

6. You will waste your time and intellect analyzing the NSE than using it to solve society's problems and generate wealth for yourself. There are brilliant people on Wazua with great intellect and insights but unfortunately that is wasted because they are not able to implement their ideas. That intellect would generate a lot more return solving problems in a small company.

That is why a few years ago, I sold all my NSE equity, started a company in stead and made a lot lot more return for myself while creating much needed jobs in the economy.



I reached a similar conclusion a few years ago. Corporate malfeasance in many companies saw me suffer six figure losses, yet the culprits who ran these firms are still roaming the streets of Nairobi as they enjoy their ill-gotten wealth. I took a hit on Mumias, CMC, KQ, Kenya Power.... just to name a few.

I have since liquidated all my holdings in the NSE, save for that Monkey called Kengen where I’ve been trapped with no dividends for the last few years.
tom_boy
#14 Posted : Sunday, December 09, 2018 9:15:00 AM
Rank: Member


Joined: 2/20/2007
Posts: 532
Enuma Elish wrote:
mv_ufanisi wrote:
Why investing in the NSE is a waste of your intellect and money and is the Kenyan reincarnation of "fool's gold"

definition:
fool's gold is also known as pyrite iron, fool's gold is a gold-colored mineral that is often mistaken for real gold but has no value

1. Your investment is subject to the whims of the market and a lot of factors outside your control. If it was your small business facing these challenges at least you have the opportunity to deal with the problems yourself or talk to that resourceful friend that could sort you out. At the NSE you have to stand on the sidelines and wring your hands as management fumbles with simple things that you would know how to deal with.

2. You will get a false sense of achievement. Naturally when the market goes up you will be on a false high. You won't understand why you were successful, preparing you to make large mistakes in the future. Your high will be more similar to that of a gambler than that of a business owner who has acquired real knowledge and experience.

3. You are entrusting your money with management in an environment of low trust and poor law enforcement. How many NSE companies have had corrupt management? It doesn't even matter if the company is doing well or not. Your company could be in a great industry where it should be making a lot of profits but management finds a way to steal the value from you in the form of bonuses, side deals and tenders to related parties etc. There are many companies in the NSE where management has done very well for themselves in the last 5 years while shareholders have lost value.

4. We as a continent are not there yet. We have very few companies listed in African stock markets precisely because we have too few companies in Africa. We are in an time period where we are called to be pioneers and build companies, yet unfortunately most of us have been educated using a syllabus suited for the developed world Wall Street BS. Your situation as an African if you look towards the West or specifically the US for inspiration should be more similar to the pioneers who first immigrated to the United States of America and had to build everything from scratch. That is where most African countries are. Not Wall Street level! The smart person is the one that can tell the difference.

5. It's a poor investment. You are much better off putting your hard earned money in CBK treasury bills and bonds and getting 9%-10% a year than losing 40%-60% of it in the NSE. If you want unlimited upside possibility take a small percentage of your assets say 10% and either start a small company or fund one where you have the ability to use your intellect, connections and money to grow the value of your investment. Worst case if you lose the 10% you still have the 90% of your assets intact.

6. You will waste your time and intellect analyzing the NSE than using it to solve society's problems and generate wealth for yourself. There are brilliant people on Wazua with great intellect and insights but unfortunately that is wasted because they are not able to implement their ideas. That intellect would generate a lot more return solving problems in a small company.

That is why a few years ago, I sold all my NSE equity, started a company in stead and made a lot lot more return for myself while creating much needed jobs in the economy.



I reached a similar conclusion a few years ago. Corporate malfeasance in many companies saw me suffer six figure losses, yet the culprits who ran these firms are still roaming the streets of Nairobi as they enjoy their ill-gotten wealth. I took a hit on Mumias, CMC, KQ, Kenya Power.... just to name a few.

I have since liquidated all my holdings in the NSE, save for that Monkey called Kengen where I’ve been trapped with no dividends for the last few years.


Pole sana about that. I guess the market is about to turn with all this negativity. Time to buy more stock.

Talk to venture capitalist who invest in new businesses where they have a say on how things go. They will tell you that 75% of their startups that they fund do not succeed.
They must find it difficult....... those who have taken authority as the truth, rather than truth as the authority. -G. Massey.
the deal
#15 Posted : Sunday, December 09, 2018 11:15:41 AM
Rank: Elder


Joined: 9/25/2009
Posts: 4,420
Location: Windhoek/Nairobbery
If mismanagement or corruption is your biggest concern or risk then avoid listed companies who are most likely to be rocked by corruption scandals..

1. GoK controlled firms e.g current Kenya Power accounting scandal... KQ...

2. Companies with weak or questionable management's e.g Britam... Home Afrika..HF.. . NBK... Mumias Sugar etc

3. Companies with significant local ownerships e.g Coop Bank, I&M... Equity... ARM.. . Centum etc


I put 70% of my money at the NSE in

1. Companies with majority foreign ownerships e.g Stanbic... Fahari... Liberty... BBK... StanChart... EABL... BAT... Bamburi... Sanlam etc

These foreign companies operating in Kenya are less likely to be rocked by corruption scandals because of oversight by parent companies on local managements...


Having said that they're not immune to business cycles or economic crisis as what's currently happening in Kenya thus profit warnings from some of them...


Corruption in Kenya is part of everything... I remember paying a bribe just to have a company registered at sheria house... It's sad... Even in the office of the President.. There are corruption scandals there... So you think companies like KQ can be immune?
Malik_
#16 Posted : Sunday, December 09, 2018 2:23:12 PM
Rank: Hello


Joined: 10/29/2018
Posts: 1
Location: Eastern Kenya Diaspora
What about EABLE...
obiero wrote:
@mv_ufanisi you have a point, the NSE is riddled with too many corrupt firms. I happen to know the inside of boards in many of the companies and I would not trust them to hold my spectacles, let alone hard earned cash.. Only 13 solid firms are investable, with proper management and promise of reasonable prospects for sizable ROI or at worst, negligible loss
1.KCB
2.KQ
3.BAT
4.Co-op
5.Safaricom
6 Equity
7.DTB
8.Jubilee
9.PAFR
10.TPSEA
11.BK
12.KEGN
13.TOTAL

“The secret of getting ahead is getting started. The secret of getting started is breaking down your complex overwhelming tasks into small manageable tasks, and then starting on the first one.” —Mark Twain
tom_boy
#17 Posted : Sunday, December 09, 2018 7:14:59 PM
Rank: Member


Joined: 2/20/2007
Posts: 532
When I reflect on my NSE journey, my major failing has been selling out too early. Examples of shares I held long ago that I sold too early, for no apparent reason include

Equity bank - I held these at initial listing before the very first split.

Safaricom - bought at 6sh and sold at 16 thinking the market was too hot and about to crash. This was in late 2016.

ARM - bought at 9shs many yrs ago. Sold at 15 shortly after. Little did I know I could have ridden it all the was past 100.

C and G at around 10 bob
Sasini at around 10bob

Some stocks I have gotten lucky.
Bought Uchumi at 10bob and sold at 20bob in a space of about 2 months then the scandals happened and price never recovered.

Got KQ at 7 bob, those years and sold at 94shs. Pure luck.

I also remember losing a cummulative 6 figure sum on this same NSE.

All in all, I am wiser now.

I know when others are running scared, its time to buckle down and invest.

My portfolio consists of
NIC at 23
Bamburi at 183
WTH at 160
FTGH at 4.5
Britam at 10.30
LKL at 4.30
TPS at 21.50
Jubilee at 460
KPL at 3.50
Kengen at 7.05
Equity at 40
KCB at 44
Kk at 15

Of course these are recently acquired positions.
My philosophy is that when everyone thinks the end will not come, its doom and gloom all round, then the light will finally come. Are we there yet, I have no clue, but that time will come.


They must find it difficult....... those who have taken authority as the truth, rather than truth as the authority. -G. Massey.
Kalameni
#18 Posted : Sunday, December 09, 2018 11:58:10 PM
Rank: New-farer


Joined: 9/20/2010
Posts: 78
@tom_boy be greedy when others are fearful and fearful when other are greedy.That light will surely come. @Mv_ufanisi you are entitled to your opinion.All the best.
muandiwambeu
#19 Posted : Monday, December 10, 2018 11:13:33 AM
Rank: Veteran


Joined: 8/28/2015
Posts: 1,039
tom_boy wrote:
When I reflect on my NSE journey, my major failing has been selling out too early. Examples of shares I held long ago that I sold too early, for no apparent reason include

Equity bank - I held these at initial listing before the very first split.

Safaricom - bought at 6sh and sold at 16 thinking the market was too hot and about to crash. This was in late 2016.

ARM - bought at 9shs many yrs ago. Sold at 15 shortly after. Little did I know I could have ridden it all the was past 100.

C and G at around 10 bob
Sasini at around 10bob

Some stocks I have gotten lucky.
Bought Uchumi at 10bob and sold at 20bob in a space of about 2 months then the scandals happened and price never recovered.

Got KQ at 7 bob, those years and sold at 94shs. Pure luck.

I also remember losing a cummulative 6 figure sum on this same NSE.

All in all, I am wiser now.

I know when others are running scared, its time to buckle down and invest.

My portfolio consists of
NIC at 23
Bamburi at 183
WTH at 160
FTGH at 4.5
Britam at 10.30
LKL at 4.30
TPS at 21.50
Jubilee at 460
KPL at 3.50
Kengen at 7.05
Equity at 40
KCB at 44
Kk at 15

Of course these are recently acquired positions.
My philosophy is that when everyone thinks the end will not come, its doom and gloom all round, then the light will finally come. Are we there yet, I have no clue, but that time will come.



It's okey @TM, welcome to the casino.
Blindfolded, I will be kind to hint to u that u r likely lined for slaughter on the following, kplcee, equitelea, kengenes, kenyansimba, britamezani. NSE, is not down on micro and macro economics alone, there exists a cancer in this market; incompetency, plunder and impunity. Watch and learn, see how fast the disease is spreading and run for your dear life.
The existing breed of alphas is largely vile deadbeats. Masters of masketeering and vexatious

The market might be down, but still pricey and wrong. Penny stock valuetrap should always be a worthwhile issue to consider any day.
,Behold, a sower went forth to sow;....
tom_boy
#20 Posted : Monday, December 10, 2018 12:18:23 PM
Rank: Member


Joined: 2/20/2007
Posts: 532
I may be wrong about my picks but one thing I know for sure, the market is not going anywhere. When we are all done mopping and crying, things will change. It will not go down for ever and ever. You can bookmark this post.

NSE is still a better option for me than trying to be a venture capitalist or trying to start a business. Both are extremely high risk ventures, capital and time intensive and exposed to all the vagaries of corrupt individuals who will steal from you and a goverment that is not helping your cause.

The only alternative is long term bonds with their attendant risks of low returns if interest rates go up. Money market funds are just for mark timing your cash. Dont expect to beat inflation. Real estate is damn expensive and low return unless you are the dust bowl type of buy and hold.
They must find it difficult....... those who have taken authority as the truth, rather than truth as the authority. -G. Massey.
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