By Babajide Komolafe

By popular requests, we return to this topic.

In the last two editions, we discussed five of the major factors you must consider before you put your money in any investment offer. These are: The underlying business; The return on the investment; The risk to the investment; The reputation of the organisation behind the investment; and Relationship management offered by the organisation.

In this edition, we focus on two other factors you must consider to ensure wise investment of your money.

★Consider Regulation of the Business
Regulation refers to the laws, government policy and agency controlling the business and the investment.
For example, the Central Bank of Nigeria, CBN, regulates all banks and their various services and products. The CBN also regulates Bureaux De Change, BDCs that sell foreign currency, Finance Houses and Fintech.
The Securities and Exchange Commission, SEC, regulates stockbroking firms, which buy and sell company shares on behalf of their customers. SEC also regulates Fund managers or Asset Management firms that offer investment services like mutual funds etc. The National Insurance Commission, NAICOM, regulates all insurance companies and their services.
These government agencies ensure that organisations that render these services are qualified and licensed to do so, and they operate their services according to the law.
They also monitor and examine the organisations and punish them when found doing anything not allowed by the law. These government agencies and the law also protect the customers of these financial institutions, especially from any illegality that can result in loss of their money.
For example, the CBN mandates banks to have a customer complaint department, it also sets a standard on how banks must resolve such complaints. Also the CBN and other government agencies have a consumer protection department.
As a result, organisations that are under government regulation are mindful of investment services or products they offer, as well as how they treat their customers. This is because they know that you, the customer, can complain to their regulator.
And in the event that any of the companies under their regulation fails and folds up, like in the case of some banks, the government agencies, ensure customers are able to recover part, or all of their money.
For example, people who deposited money in the defunct Heritage Bank have received part, or all of their deposits. But people who invested in the collapsed CBEX may not get money back. So be guided.

★Do Your Research
In addition to the above, and also implied in the above factors, is that you must do your personal research about the organisation and investment offer before you part with your money. Don’t depend on others to do this for you because it is your money.