Founder/CEO, Vestract, Tomilola Balogun, speaks with Gboyega Alaka on her venture into the investment and finance world, the Green Investment Club formed 7 years ago, Twelvevest, a digital investment platform and her book, Investment Clubs: How to Create Wealth Beyond Your Pay-Cheque by Investing with Others.
Why did you venture into finance and investments?
I studied economics as a first degree, so I was quite exposed to the world of finance. I also got to a point in my career when I realised being knowledgeable about finance was very different from having working knowledge on how to manage my personal finance and investment decisions. This was a wake-up call for me and it set me on a path to learning as much as I could about how to put my money to work.
There were two key things that motivated this wake up call. The first was getting accepted for my MBA programme and knowing I wasn’t going to be earning steady income for two years and the second was the fact that I had been working for four years and earning a good salary, yet I had no significant savings. It was clear my personal finance habits had to change.
Thankfully, I found like-minded friends in my MBA class who shared the same sentiments. We decided to start an investment club for four key reasons: to pool our individual funds together so we could have a lot more cash to invest, to get access to bigger investment opportunities, to share the rewards and risks of investing together and to hold ourselves accountable to our financial goals. Starting an investment club gave me an education in investment I didn’t realise I lacked. I learnt how to invest in treasury bills, the stock market, money market, small businesses etc. It was quite exciting and scary at the same time because we lost money and we gained money on some transactions.
I started my personal blog where I shared various themes in 2014 and I soon got to realise there were others in the same boat as I was, who really needed information on how to get their finances in order and make investment decisions in Nigeria. One blog post led to another and I received requests for a workshop. This led to me holding multiple workshops where I shared my practical investment experience and invited experts to share as well. With every step, I saw a gap in financial education, and I rose to the challenge.
Today, I manage the biggest investment club in Nigeria: www.thegreeninvestmentclub.com; and a digital investment platform, www.twelvevest.com, as well. The digital investment platform is currently only open to members of the Green Investment Club. We plan to open up to the public sometime in 2020.
What does it mean to be “The Millennial Investor”?
Millennials, also known as Generation Y, are the demographic cohort following Generation X and preceding Generation Z. It is an identity given to a specific set of people with similar core values and needs. Based on research, Millennials are well-educated and much better connected. They are less religious and are getting married later and having less children when they do. They are just as optimistic as any previous generation. They know they must, with their friends and peers, take control of their own careers. That’s partly because they know that employees who stay with companies longer than two years will be taken for granted and will, on average, get paid 50% less. They also know that they live in an impermanent, ever-changing digital world. We want to earn an income working with core values we hold dear, create additional streams of income by investing in social impact causes and use that income to see the world via travel. I admit this might be a general definition, but it holds for at least 60% of this group of people.
You created models for investment clubs; can you expatiate on how these models can benefit the average Nigerian.
My book, Investment Clubs: How to Create Wealth Beyond Your Pay-Cheque by Investing with Others shares my story on starting an investment club with friends. It also shares the 4-step process to start, manage, invest and grow an investment club. Based on this 4-step process, the book outlines the three models of investment clubs I have implemented in Nigeria over a 5-year period, backed by case studies from other people I interviewed who also manage investment clubs in Nigeria, Kenya, UK and the USA.
The three models of investment clubs include the financial model, the project-based model and the non-financial accountability model.
The financial model is the traditional model of investments clubs, which is quite popular all around the world. In a financial investment club, members contribute an agreed sum of money on a regular basis towards investing in multiple investment opportunities as a group. Members agree on certain clauses, such as the objective of the club, the financial contribution required by each member, the minimum return on investment required by each member, the legal structure of the club etc. Once these clauses are agreed and aligned, members create a constitution to guide the decisions of the club. The oldest investment club in Nigeria was established in 1977, based on this model and succeeded in creating wealth for its members, which still exists for them in their 70s. This is also the model my friends set up when we started our investment club in 2013. It comes with its pros and cons, all of which I outlined in detail in my book.
The project-based model focuses on a particular industry or investment opportunity in one industry. This model is quite popular for real estate projects. I personally managed a project-based model for two years for 40 women who set out to invest in real estate in Lagos, Nigeria.
The non-financial model, like the name suggests, is simply an accountability group where members set goals, hold themselves accountable and share investment opportunities with each other. The green investment club www.thegreen-investmentclub.com currently implements this model and we have seen the club grow to close to 1,000 members across 13 countries who consistently invest in multiple investment opportunities in Nigeria.
How would you compare the investment sector of today to when you started?
Back then, we didn’t have as many investment options or platforms like we do now. We had only the traditional investment options; stock market, money market, small businesses to work with when we started our investment club. Today, there are so many fintech platforms that help you save, invest and earn passive income.
Millennials are the first full technology generation. We are also the generation experiencing more financial insecurity due to high debt and economic issues. When we started investing in my investment club, we had to walk into banks or financial institutions to ask questions, fill forms, seek experts to help us understand how to navigate the traditional investment markets…. That has changed significantly, as there are mobile apps that give you access to invest in treasury bills, the stock market, alternative investment opportunities like agriculture and real estate, transportation etc. and we haven’t even scratched the surface of these innovative changes.
I am also in the process of launching my digital investment platform to the general public.
What would you tag your worst investment experience?
One of our very first investments was in a carpool service business for young working professionals. This was before the advent of Uber. One of the members of the club subscribed to a car service that picked him up at home, dropped him off at work, picked him up at close of work and dropped him off at home every day. So we thought this was in demand and invested. As MBA graduates, we thought we had mitigated all the risks; but apparently we didn’t mitigate the risk of multiple bounced cheques. It was a great lesson for us to always make an investment decision based on the integrity of the person or small business owner.
Did we lose money? Yes, but the lessons from this transaction have stayed with us.
What has been your biggest investment achievement till date?
My greatest achievement with the Green Investment Club is seeing the results of our members. Our members have actively built investment portfolios which have helped them make flexible life decisions. As a group, we have invested over N1.5bn in multiple investment opportunities and small businesses in Nigeria. Our community in the USA has also invested actively in real estate in the USA.
I have also seen other investment clubs spring up as a result of using the 4- step process I share in my book.
Considering how tough things are right now, what is the easiest way for one to increase their Income?
I’ll share 3 key tips; first tip is to create a budget. A budget is a plan for your current income. If you don’t keep track of how much you’re spending, you’ll always wonder where all your money is going, even if you earn more.
When I work with my clients or members of my community to do this, they are always shocked at how much cash has gone through their bank accounts. They also find out they can actually save and invest with the difference.
Second tip – Automate your savings and plan to earn a stream of income from investing.
Third tip – Create additional streams of income. I don’t think it is wise to plan to live on one stream of income in this economy. We all need to create additional streams of income to meet the gaps. I earn income from 4 key streams: my skills, my knowledge, my investments and my business.
Leave a Reply