Nigerian entrepreneur and business leader, Dr. Tayo Oyedeji, recently made a strong case against equity investment. According to him, not only are stocks riskier to invest in, good returns on investment cannot always be guaranteed compared to other diversified forms of investments.
While these assertions can easily be disputed by others, we understand that some people may, indeed, appreciate them. That is why we have carefully curated the Twitter thread for your reading pleasure. Do enjoy/learn from it.
THREAD: Why you should NOT buy Google, Facebook, GE, Exxon, or MTN stock.
— Prof. Tayo Oyedeji (@tayooye) June 6, 2019
Friends, colleagues, and family members often ask for my thoughts and opinions on an individual stock. Should I buy Facebook, it has grown by XYZ% in one year? Uber’s IPO seems like a great opportunity, should I buy it? MTN will continue to dominate the market, should I buy it?
My answer is almost always NO. Here’s why?
1. Risk: All investments are risky. Putting a lot of money on any company is an unacceptable level of risk for smart investors because you don’t control the company and cannot predict the future. E.g. Google was great until last week when US Congress started anti-trust talks.
2. Eggs and baskets: Putting all your eggs in a single basket is a bad idea. How can you predict the effects of micro or macroeconomic factors on a single company? You can’t. It’s always better to diversify. E.g. Enron couldn’t fail until it did.
3. Returns: Professional stock pickers mostly under-perform index and mutual funds. Even the best of the best who wake up in the morning and ONLY think about the stock market don’t consistently make better returns than a diversified portfolio.
4. Finally, Most people don’t have: a) The skills to select the best individual stock. b) The time to do the research required. c) The psychic ability to predict the future.
That’s why my answer to “should I buy XYX stock” is almost always NO. Instead, buy. 1) A diversified mutual fund. 2) An index fund. 3) A money market fund.
How do I invest in these instruments if my bank doesn’t even understand them? I know many people don’t have access to safe investments so I have been thinking about starting an international investment fund to bridge the gap between financial literacy and investment decisions.
I am still gauging interests before making a final decision. Please send an email to investwithtayo@gmail.com to let me know if you could potentially be interested in an international investment fund with a “safety first” conservative philosophy. Thanks.
