Lessons from Young Investor #1, M.D. Avor

Name: David Mawutor Avor

Age: 25

Twitter: @MD_Avor

My good friend and business partner, M.D. Avor, as he likes to be called, is a Chartered Insurer, a founding member of Fortune Hunters Investment Club (now FHI Group) and currently the head of the e-Business Unit at Vanguard Assurance Company Limited.

He began his investment Journey after turning 18 and purchased GHc 50 worth of EPACK shares. “It’s been almost 7 years since then and I have not for once regretted my decision.” – He said to me.

M. D. Avor
Chartered Insurer,
Head of e-Buisness Unit-
(Vanguard Assurance)

He invests mainly in 3 general classes of instruments:

1. Treasury bills

2. Mutual Funds: He has done Epack, B’fund, iFund and M’fund. Currently, Heritage Fund and Fortune Fund are his favorites. He also contributes regularly to his investment group – Fortune Hunters, which he considers as a form of Mutual Fund.

3. Shares: “I have invested in quite a few shares, mainly the financial stocks.” He said to me.

Why the above Investment instruments?

“As can be seen from my investment instruments, I do not have any particular preferences. I am an active investor and I move my money dependent on prevailing market conditions. For example, for the mutual funds, I have moved money from some because I felt they were over-priced; others because it was cumbersome getting regular information on the performance of my investment (and I hate “to be in the dark”); and still others because of poor returns.”

Mistakes from His Investing Experience

1. He blindly followed the “IPO mania”: To him, IPOs (Initial Public Offers) are in themselves not a bad thing but, the few he has witnessed in Ghana in his investing experience has taught him some lessons. Firstly, the time lag between the completion of the IPO and when the shares start active trading is normally too long! “With my knowledge now, I would rather invest my money in a short-term fund and wait to get the share on the open market when it starts trading,” he said. Though when one does that one might the shares at a price slightly higher than the IPO price, his experience taught him that he will still be far better off with this strategy. Secondly, most of our IPOs tend to be over-priced! “It looks as if some of the owners of companies which get listed on the stock exchange usually want to cash out at the expense of the unsuspecting public.” David said and I nodded in agreement.

2. He failed to give price limits when placing a sales order: This is something I share with all my investor friends and I think you should take note of this when placing orders. According to David, one of the worst mistakes he has ever made was to offer his shares in a company for sale through a broker without giving a limit at which the shares should not be sold. To his surprise, the shares were sold far lower than the prevailing market price. “This is a mistake I will never repeat.”- David said with certainty.

3. He failed to buy enough when the market crashed: In the year 2009, the GSE witnessed one of its worst years, share prices fell drastically. To David, He should have bought more stocks at this time. “I even saw GCB shares going for as low as 50 pesewas per share (unbelievable!)”. Instead of finding some more money to purchase more shares, my inexperience got the better part of me and I also panicked with the crowd. Surprisingly he eagerly looks forward to the next crush; and when others start selling off, he would be busily buying. J

Lessons Learnt investing

1.Have an investment plan: According to David, before you begin investing or decide to purchase any investment instrument, be clear in your mind what your plan is. By plan, he means what the guiding principles of your investment would be. Give them an example David. “OK. for example, personally, I have as part of my plan the rule that once T’Bill rates go below 20% per annum, I stop my roll-over instructions and move my T’Bill funds elsewhere.” And Why? “I will explain later but the point is, set some parameters right from inception.” – He said.

2. Invest regularly but don’t get attached to any particular investment vehicle: Just as an employee gets fired for non-performance, don’t hesitate to change an investment vehicle if it is not meeting your performance indicators (but of course, your indicators must be realistic). According to David, remember their names, there are just “vehicles” to get you to your destination; change them if they are not doing that well enough.

3. Know when to “cash out” and when to “cut your losses”: “Investing is an emotional thing. I have seen people hold an investment for too long refusing to sell when the price peaked and waited until the share’s price began to tumble.” He said depicting his style of investing. He then added that on the other side are those who obviously made a wrong investment in a company which is “going nowhere soon.” Instead of cutting their losses quickly and moving on to the next vehicle, they hold on; somehow expecting some miracle. Know when to cut your losses.

In concluding with my friend and business partner, David, I noticed he picked most of his in investment lessons from Robert Kiyosaki’s “Guide to Investing” and some from Aawoenam Amevor’s book – “Investment: How to Create Wealth on the Stock Market.”

David considers Investing as a game; it can be fun and you can either win or lose. However, the more knowledge and experience you get, the fewer your losses become and the bigger and more consistent your wins become. “Trust me, the reward for winning this game of Investing is really worth it – Cash!” – David Avor.

David possesses a strong academic background – BSc. Administration (Insurance Option) from the University of Ghana Business School (UGBS); a Chartered Insurer and an Associate of the Chartered Insurance Institute, U.K; and is currently undertaking his MBA in Finance from UGBS.

His personal life mantra is: “I climb; I pull up; I push up!”. Simply meaning, he develops himself, mentors others to come to his level and also helps others attain heights which he himself cannot.

Read about the Second Young Investor.....