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Financial Literacy

How to spot buy or sell side analyst from Nigeria

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As a retail investor, there are times where you will have to rely to financial advice or tips to decide whether to buy, sell or hold a stock. Knowing which advice is in your best interest is critical to helping you make the right decision.

This is even made more complicated because in the world of investing, people who need your money do so because they either want you to invest an asset or help you invest in one. Either way they earn fees from you.

Therefore, it is important that you know who has a better incentive to get you to invest in your best interest. This is why, the world of investing in the financial market is divided into buy and sell side. They both want your money for one reason or the other.

In the Financial Services industry, companies or market operators are usually classified as either Buy-Side or Sell-Side. The buy side makes up one half of the financial market, and the sell-side make up the other, although some companies operate and do deals on both sides.

Buy-Side 

Buy-Side companies buy large amounts of securities and assets for their own or clients’ accounts, and for money management purposes. Firms on the buy side are money managers that try to create value for their clients by purchasing assets that are under priced.

On the Buy Side of the Capital markets, we have professionals and investors that have money, or capital to buy securities. These securities include stocks, bonds, treasury bills, commercial papers, derivatives, real estates and a variety of other products that are issued by the sells side.

Examples of Buy-Side companies include; Insurance companies, Pension funds, Mutual funds, Private equity funds, Sovereign wealth funds, Trusts etc.

Characteristics of the Buy-Side

  • Manage their clients’ money.
  • Make investment decisions (buy, hold or sell).
  • Earn the best risk-adjusted return on capital.
  • Perform in-house research on investment opportunities.
  • Perform financial modeling and valuation.
  • Find investors and recruit capital to manage.
  • Grow assets under management (AUM).
  • Make money by buying low and selling high.

Firms on the buy side are money managers that try to create value for their clients by purchasing assets that are underpriced.

On the Buy Side of the Capital markets, we have professionals and investors that have money, or capital to buy securities. These securities include stocks, bonds, treasury bills, commercial papers, derivatives, real estates and a variety of other products that are issued by the sells side.

Sell-Side

The Sell-Side consists of institutions that are selling research, advisory and other financial services to its clients. Sell-side companies make money through fees and commissions, so their primary goal is to work on as many deals as possible

The sell side is made up of brokerage firms, investment banks and other entities that make buy/sell recommendations, upgrades, downgrades, target prices and research options investors can use to make investing decisions.

Characteristics of the Sell Side:

  • Advise corporate clients on major transactions.
  • Facilitate raising capital including debt and equity.
  • Advise on mergers and acquisitions.
  • Win new business (build relationship with corporates).
  • Market and sell securities.
  • Create liquidity for listed securities.
  • Help clients get in and out of positions.
  • Provide equity research coverage of listed companies.
  • Perform financial modeling and valuation.
  • Make Money through fees and commissions.

Analysts are employed both on the buy side and the sell side, but they do very different things.

Buy side analysts conduct research for internal use only – if they derive a formula or strategy that can help their firm beat the market, they keep it from the public.

For example if a bank would employ its in-house investment analysts who will be responsible for deriving formulas or strategies to help the company achieve high returns. These strategies will not be revealed to the public.

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Sell side analysts on the other hand conduct research for the public. They provide research to clients so they can make better investing decisions.

For example, a company that needs to raise money will call up an Investment Bank to help issue either debt or equity. The bankers will prepare an analysis on the necessity and viability of raising capital with extensive financial modeling techniques.

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Personal Finance

5C’s of creditworthiness: What lenders, Investors look for in a business plan

Business owners need to be aware of the criteria lenders and investors use when evaluating the creditworthiness of entrepreneurs seeking financing.

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Five things to consider before securing a loan

Banks usually are not a new venture’s sole source of capital because a bank’s return is limited by the interest rate it negotiates, but its risk could be the entire amount of the loan if the new business fails. Once a business is operational and has an established financial track record, banks become a regular source of financing.

For this reason, the small business owner needs to be aware of the criteria lenders and investors use when evaluating the creditworthiness of entrepreneurs seeking financing.

Will the business that an entrepreneur actually creates look exactly like the company described in the business plan? Of course, not.

The real value in preparing a business plan is not so much in the finished document itself but in the process it goes through – a process in which the entrepreneur learns how to compete successfully in the marketplace. In addition, a solid plan is essential to raising the capital needed to start a business; lenders and investors demand it.

Lenders and investors refer to these criteria as the five C’s of credit.

READ: 5 ways to raise funding for your business

1. Capital: A small business must have a stable income base before any lender is willing to grant a loan. Otherwise, the lender would not be making, in effect, a capital investment in the business. Most banks refuse to make loans that are capital investment because the potential for return on the investment is limited strictly on the interest on the loan, and the potential loss would probably exceed the reward. In addition, the most common reasons that banks give for rejecting small business loan applications are undercapitalization or too much debt. Banks expect a small company to have an equity base investment by the owner(s) that will help support the venture during times of financial strain, which are common during the start-up and growth phases of a business. Lenders and investors see capital as a risk-sharing strategy with entrepreneurs.

2. Capacity: A synonym for capital is cash flow. Lenders and investors must be convinced of the firm’s ability to meet its regular financial obligation and to repay loans, and that takes cash. More small businesses fail from lack of cash than from lack of profit. It is possible for a company to be showing a profit and still have no cash – that is, to be bankrupt. Lenders expect small businesses to pass the test of liquidity, especially for short term loans. Potential lenders and investors examine closely a small company’s cash flow position to decide whether it has the capacity necessary to survive until it can sustain itself.

READ: How to scale as a small business on a budget

3. Collateral: Collateral includes any asset an entrepreneur pledges to a lender as security for repayment of a loan. If the company defaults on a loan, the lender has the right to sell the collateral and use the proceeds to satisfy the loan. Typically, banks make much unsecured loans (those not backed up by collateral) to business start-ups. Bankers view the entrepreneurs’ willingness to pledge collateral (personal or business assets) as an indication of their dedication to making the venture a success. A sound business plan can improve a banker’s attitude towards venture.

4. Character: Before extending a loan or making an investment in a small business, lenders and investors must be satisfied with an entrepreneur’s character. The evaluation of character frequently is based on intangible factors such as honesty, integrity, competence, polish, determination, intelligence, and ability. Although the qualities judged are abstract, this evaluation plays a critical role in the decision to put money into a business or not.

READ: 7 Ways to pay for your higher education

5. Conditions: The conditions surrounding a funding request also affects an entrepreneur’s chances of receiving financing. Lenders and investors consider factors relating to a business’ operation such as potential growth in the market, competition, location, strength, weakness, opportunities and threats. Another important condition influencing the banks is the shape of the overall economy, including interest rate levels, inflation rate, and demand for money. Although these factors are beyond an entrepreneur’s control, they still are an important component in a banker’s decision.

The higher a smaller business scores on the five C’s, the greater its chances of receiving a loan.

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Written by Chukwuma Aguwa

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Personal Finance

Don’t be fooled by COVID-related scams

Always consult the institution in charge of health-related matters to confirm any fishy information you come across.

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The nature of and the manifestation of the Covid-19 disease is such that there’s only a little time available to remedy the situation before it gets chronic. Although the infection begins by exhibiting mild symptoms, if you do nothing in a short time, it could lead to death in a matter of days.

This whole picture has caused many to become desperate about Covid-related issues, launching into panic mode at the sight of any information. As a result, such people are not far away from falling for fraudsters.

With the different kinds of news flying around, you mustn’t be fooled by Covid-related scams.

The Coronavirus threatens the health of millions of people around the world daily, also killing thousands along the way. To curb the spread and remedy the situation, bodies like the CDC, WHO, and every country’s local health organisation like the NCDC, frequently circulate information around communities. However, it has also led to fraudsters taking advantage to provide fake news, and even asking for donations.

Each day, there seems to be a new account or NGO asking for donations into the health sector, and though some are legit, many are just fraudsters posing to take advantage of innocent citizens. So far, numerous complaints about scams have been recorded, especially with people who are looking to support the health cause in any way they can.

READ: Africa to spend $9 billion on Covid-19 vaccine, access to supply is big problem

Channels used for COVID-related scams 

There are three major ways scammers take advantage of the haziness of the situation to dupe people. To start with, they appeal to the emotions of humans, who see the high death toll and suffering. As a result of what is happening, people have been willing to donate funds for medical supplies, isolation centres, and financial compensation for medical workers.

Scammers take advantage of this by posing as charity organisations and solicit for funds. Most times, as soon as their target is met, they clear their footprint without leaving a trace behind.

Another way they scam people is by manufacturing and selling fake or low-quality health products. Everyone wants to get their hands on a cure, or something that can at least protect them from the virus, and scammers are meeting their needs by providing just that.

READ: China joins WHO vaccine programme as it fills huge gap left by United States

The World Health Organization currently approves only one vaccine, and any other thing outside it is outrightly fake or just a supplement that will help your body. Currently, only the Pfizer vaccine is clinically tested and approved to work. Be sure to not throw your money in the wind by purchasing some of these fake drugs around.

Lastly, scammers create systems to extract a patient’s personal information, thereby having access to the person’s true identity. It could be in the simple form of opening a registration portal where you supply all your details.

Therefore, only give information to approved bodies and not any random online site that appears legit. These fraudulent individuals can do a lot of damage to your identity. Stay vigilant, only communicate with approved bodies, and always ask questions if you are not sure or suspect foul play.

The place of electronics in COVID-related scams

These fraudsters usually reach out to you through the digital sphere. Hence, watch out for cold calls, text messages, or emails requesting donations to certain bodies. The best way to confirm the legitimacy of such a message is to visit the organisation’s official website in a different browser. Never follow the link in the mail or text directly, as it can be easily embedded with spyware. Therefore, a single click could see them extract all your personal information, including bank details.

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Also, please stay away from those who claim to have a cure, and accompany it with testimonies of people who have used it. They are low graders desperate for your money. Vet them by searching online and see what people are saying. In all, always look out for suspicious messages, and opt out if you are sceptical.

In a nutshell, you should not believe any cure, vaccine or supplement that the World Health Organization does not approve of.

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Conclusion

The government or legit health institutions do not cold call citizens to request donations or coerce them into making one. If you receive a call out of the blues, chances are it’s a scam, which is why they mostly try to hurry you to donate before you realise it. Always consult the institution in charge of health-related matters to confirm any fishy information you come across.

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