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Riding the Bull Wisely – By Marc Van de Walle

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The year began amidst a raging bull market. Global equities have made up all the post-pandemic losses and are up 85% (as at 7 May 2021) since their March 2020 lows. Yet, our data shows many investors have missed the bull run altogether or are significantly underinvested, waiting for the ‘right’ opportunity to re-enter. Those who did stay invested through the volatility or re-entered the market in 2020 have a slightly different problem (‘Should I sell?’).

It is safe to say that most of us belong to one of these categories. History shows there are time-tested methods to deal with these challenges and earn a respectable return over the long term.

To tackle the last problem first (‘Should I sell?’), we believe it would be imprudent for investors who have ridden the bull market thus far to cash out. We do not expect a major bear market to develop, at least in the next year, given accelerating global growth and corporate earnings expectations and extremely loose policy settings. We expect economies and businesses to gradually return to normalcy by the end of the year as the pace of vaccinations picks up worldwide.

Stay well-diversified

Based on decades of market history, it is hard to make a case for an equity bear market without an accompanying economic recession. Therefore, the risk of trying to time when to exit the market before any short-term correction and re-enter at the bottom are greater than staying invested (since the investor could lose some of the best days in the market by staying out). For this group, the best course would be to ensure that they stay well-diversified across asset classes and sectors and rebalance their portfolios if they have strayed significantly away from their risk tolerance.

Cost of inaction 

For those who have stayed out of the market before or after the pandemic, the challenge of when to get back in is seemingly much harder, given that equities are now at record highs and there are increased concerns about a short-term correction. Often, their hesitation stems from a desire to perfectly time their re-entry. In our experience as wealth managers, this is the single most common investment mistake.

For this group, the salient point to consider is the cost of inaction. A simple diversified portfolio (50% global stocks and 50% global bonds) for buy-and-hold investors has returned close to 6% per year over the past 10 years, even after taking into account six 10%+ equity market pullbacks, including the 34% correction at the height of the pandemic in March 2020. At that rate of return, USD10,000 invested a decade ago would have built a roughly USD18,000 nest egg. An equivalent savings deposit paying, let’s say, 1% interest would have grown to only about USD11,000, not even keeping pace with inflation.

The rules of investing 

This example brings us to the seven key rules of saving and investing wisely:

  1. Prepare an investment plan based on your financial goals, risk tolerance and time horizon;
  2. Set aside funds for short-term exigencies in cash;
  3. Invest most of the remaining funds (say 80%) in a core portfolio broadly diversified across asset classes, geographical regions and industry sectors. This will help limit the downside from unexpected events (because they will happen over our lifetime!);
  4. Stay invested through market cycles, since time and the miracle of compounding returns is your friend;
  5. Rebalance the portfolio at regular intervals (say twice a year) to bring it back to your risk tolerance;
  6. Use the remaining funds (at most 20%) – let’s call it ‘funny money’ – for short-term trading (for those who want the thrill). Make sure this is based on sound research and not the latest fad, and done with a cool head – not be too greedy at the top and panicky at the bottom (using stop-losses would help remove personal biases and limit downside risks for this part of the portfolio); and
  7. Finally – and this is the crucial part – follow the investment plan! Procrastination, as we saw above, is the greatest enemy of the investor.

For some investors, putting all funds to work immediately could be psychologically challenging. For this group, setting up a pre-determined regular investment plan would remove any personal biases. This so- called dollar-cost averaging strategy would help the investor to automatically benefit from any market upside, while allowing the investor buy cheaper if the market pulls back along the away. This strategy could include pre-determined rules to accelerate purchases in the event of larger-than-expected market drawdowns.

In the long run, the market is always a bull. The above strategy should enable the investor to overcome the downturns, mitigate biases and stay in the game. Afterall, we need to get on the bull before we can ride it.

(Marc Van de Walle is Global Head of Wealth Management at Standard Chartered Bank)

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Nigerian Stock Exchange

Nigerian Stock Market Continues to Decline

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Nigerian equities market declined for a third consecutive day on Thursday as 24 stocks closed in the red against 14 stocks that gain.

Investors traded 266,115,101 shares worth N4.216 billion during the trading hours of Thursday, against 243,185,049 shares valued at N3.747 billion that were transacted in 3,777 deals on Wednesday.

Market value dipped by N71 billion to N22.494 trillion, down from N22.565 trillion recorded on Wednesday. The Nigerian Exchange Limited All-Share Index lost 0.32 percent to 43,108.77 index points.

Sectorial analysis showed the banking industry closed in the red after losing 116 basis points on the back of a broad decline in ETI, Unity Bank and Union Bank of Nigeria Plc. Jaiz Bank and Fidelity Bank recorded gains.

Also, the consumer industry lost 106 basis points on a decline in Nigerian Breweries, Interbrew and Cadbury. Honeywell Flour led gainers with +9.76 percent.

Oil and gas and industrial industries shed 164 basis points and 1 basis point respectively. The Exchange year-to-date return depreciated by 7.05 percent.

Top Gainers

HONYFLOUR N 3.69 N 4.05 0.36 9.76 %
AIICO N 0.59 N 0.64 0.05 8.47 %
REGALINS N 0.36 N 0.39 0.03 8.33 %
UPL N 2.50 N 2.70 0.20 8.00 %
IKEJAHOTEL N 1.25 N 1.35 0.10 8.00 %

Top Losers

Symbols Last Close Current Change %Change
MRS N 15.20 N 13.70 -1.50 -9.87 %
CHAMS N 0.23 N 0.21 -0.02 -8.70 %
ETI N 8.75 N 8.00 -0.75 -8.57 %
CHIPLC N 0.62 N 0.57 -0.05 -8.06 %
UNITYBNK N 0.55 N 0.51 -0.04 -7.27 %

Top Trades

Symbols Volume Value
HONYFLOUR 52467164.00 209572149.51
GTCO 22957965.00 578561871.30
ZENITHBANK 22886054.00 559037845.90
TRANSCORP 18464628.00 17727984.83
ACCESS 13938330.00 127370154.95

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Nigerian Stock Exchange

Stock Market Extends Decline on Wednesday

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Nigerian stock market extended decline for a second consecutive day on Wednesday despite 23 stocks closing in the green against 18 stocks that lost.

Investors exchanged 243,185,049 shares valued at N3.747 billion in 3,777 transactions on Wednesday, against 217,972,819 shares valued at N2.908 billion that were traded in 4,158 deals on Tuesday.

Market value dipped by N12 billion from N22.577 trillion recorded on Tuesday to N22.565 trillion on Wednesday while the All-Share Index sheds 0.02 percent to close at 43,245.02 index points.

The banking sector gained 25 basis points on positive close of Fidelity Bank, Zenith Bank, Sterling. Wema Bank and Access Bank both closed in the red.

The consumer goods sector also gained, expanding by 9 basis points on Unilever, Dangote Sugar, Flour Mill and Nestle. Honeyflour and Intbrew shed 9.78 percent and 1.87 percent, respectively.

The oil and gas sector lost 24 basis points amid the US decision to increase the global oil supply from its reserve. Industrial index gained 13 basis points. See other details below.

Top Five Gainers

Symbols Last Close Current Change %Change
LIVINGTRUST N 0.80 N 0.88 0.08 10.00 %
CHAMS N 0.21 N 0.23 0.02 9.52 %
AIICO N 0.54 N 0.59 0.05 9.26 %
IKEJAHOTEL N 1.15 N 1.25 0.10 8.70 %
NGXGROUP N 15.30 N 16.50 1.20 7.84 %

Top Losers

Symbols Last Close Current Change %Change
HONYFLOUR N 4.09 N 3.69 -0.40 -9.78 %
ETERNA N 6.65 N 6.05 -0.60 -9.02 %
REGALINS N 0.39 N 0.36 -0.03 -7.69 %
CORNERST N 0.56 N 0.52 -0.04 -7.14 %
WEMABANK N 0.83 N 0.80 -0.03 -3.61 %

Top Trades

Symbols Volume Value
ZENITHBANK 37408414.00 908424015.70
FCMB 27441157.00 88579395.67
HONYFLOUR 22855614.00 87590297.99
STERLNBANK 22764324.00 33695488.59
ACCESS 14118422.00 131893588.25

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Nigerian Stock Exchange

Nigerian Stock Market Dips Marginally on Tuesday

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The Nigerian stock market extended its decline on Tuesday despite investors transacting over N11 billion worth of Oando shares on Monday.

Investors traded 217,972,819 shares valued at N2.908 billion in 4,158 deals, against 2,402,071,798 shares worth N16.467 billion that were transacted in 4,811 on Monday.

The banking industry gained 21 basis points on the back of positive close from Wema Bank, Access Bank, UBN and ETI.

However, the consumer goods sector dipped by 1 basis point as the decline in Intebrew and Dangote Sugar outweighed profit from Honeywell Flour, Flourmill and Unilever. Oil and gas sector lost 20 basis points while the industrial sector closed flat.

Market value of all listed equities depreciated by N1 billion from N22.576 trillion it closed on Monday to N22.577 trillion on Tuesday.

All-Share Index declined by 0.01 percent to 43,255.14 index points, down from 43,260.13 index points posted on Monday. The Exchange year-to-date return moderated to 7.41 percent.

Top Gainers

Symbols Last Close Current Change %Change
HONYFLOUR N 3.72 N 4.09 0.37 9.95 %
UPL N 2.30 N 2.50 0.20 8.70 %
CHIPLC N 0.54 N 0.58 0.04 7.41 %
GLAXOSMITH N 6.05 N 6.40 0.35 5.79 %
FTNCOCOA N 0.40 N 0.42 0.02 5.00 %

Top Losers

Symbols Last Close Current Change %Change
UPDC N 1.39 N 1.26 -0.13 -9.35 %
NEM N 2.05 N 1.86 -0.19 -9.27 %
MANSARD N 2.35 N 2.23 -0.12 -5.11 %
CHAMS N 0.22 N 0.21 -0.01 -4.55 %
ROYALEX N 0.49 N 0.47 -0.02 -4.08 %

Top Trades

Symbols Volume Value
GTCO 36186902.00 919633415.45
FBNH 31543824.00 387277938.75
ZENITHBANK 13433903.00 327244854.85
ACCESS 13091171.00 121509692.05
HONYFLOUR 9841846.00 40253150.14

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