30th june 2015
Today, was not kind at all. I woke up as early as 7am, with one thing on my mind which was how I would get my account number for my nysc service year. I was assigned to a bank, one of the failing banks in Nigeria soon to be sold.
I registered with them about 5 days ago, and I was yet to receive my account number. Infuriated, I thought to myself “ I have to give this people a piece of my mind, it was going to go down in their office”. On getting there, I registered my complain to the customer relationship manager and unsurprisingly I was calm like a —- even upon my mouth making…lol….i am an introvert, so what can I say?. The annoying thing though was that they just processed it that same morning even though I registered with them 5 days ago.
Such incompetence, little wonder why they are failing miserably, and they have a meager amount of customers. That aside, after that, it was off to my local government area to register my details with the nysc local government inspector. By the way, nysc is a voluntary service to my country ,Nigeria. To me it is compulsory because if you do not do it, you cannot get a job anywhere in Nigeria. I am not against serving my country, I think it is quite great to do so, but the country should show consideration and care to its citizens and should not be buried in selfish ambitions. A lot of people suffer each day, unable to eat three square meals a day and some are embezzling billions. This pains me a lot because I hate to see people suffer, while some are enjoying and spending lavishly the money they did not earn.
After finishing from the local government I was assigned to, It was straight home. I met my dad on the way and he was to drop me off. Then the car stopped a considerable distance to getting home. I hurried down in my full regalia to push the car. What a miserable day for me. But on the plus side, I was still able to learn some new things after sleeping and waking up. The topic I learnt was a continuation of the previous topic which is portfolio management. I looked at the types of investors for which portfolio management can be taken on behalf of. I would briefly summarize it below. I hope you enjoy it.
Types of investors in portfolio management
1) Individual investors: Has the name implies, these are household individual investors that invest for a number of reasons. The reasons can range from purchasing a home to education for their children and to retirement.
2) Institutional investors: Institutional investors generally have large investment portfolios; they normally have endowments for example universities. These endowments are used to support the activities of the institution and are invested for returns. Charities are also institutional investors, but unlike universities that have endowments, they have what is called a foundation. A foundation is a fund established for charitable purposes to support specific types of activities or to fund a research related to a particular disease.
3) Banks: They are investors with high liquidity needs and a short investment horizon. The main aim of a bank’s investment is to earn more on the bank’s loans and investments than what the bank pays for her deposits.
4) Insurance: Insurance companies have high liquidity needs with investment horizons ranging from short to long. Insurance companies invest the premium of customers, and fund customers claim as they occur.
5) Mutual funds: A mutual fund is a pool of funds, many investors come together to form a mutual fund by contributing their various commitments, and then the mutual fund is invested as a single fund. Mutual funds can practice index investing, growth investing, bond investing and more. They can restrict their investments to a particular subcategory of investments.
Mutual funds have high liquidity needs because they need to meet the needs of the investors as they arise.
6) Sovereign wealth fund: refers to a pool of funds by the government, they usually have high risk tolerance, long investment horizon, and low liquidity needs.
7) Pension funds: This is a pool of funds from working class people that are saving towards retirement in their Rsa account. They save by paying a certain percentage of their salaries, and also their employer remits the same or slightly more than they do. This is for defined contribution plans. There is another one called the defined benefit plan. Here the employer promises to give them a certain amount at retirement based on some predetermined formula. The employer pays a specified monthly benefit on retirement that is predetermined by a formula based on the employee’s earnings history, tenure of service and age, rather than depending directly on individual investment returns. Here the employer bears the risk of a fall in returns on investments or during periods of financial crisis.
In a defined contribution plan run by a pension fund, the money is invested by the pension fund and returns added to the total sum available to be paid during retirement or at the loss of a job. Although it should be noted that pension funds take a certain percentage of asset under management each year, and they may take carried interests on revenues gotten from investments.