How to invest in Coca-Cola from Nigeria

What does Coca-Cola do?

The Coca-Cola Company is the U.S.-based transnational corporation that produces and markets the Coca-Cola beverage. Although more properly, the original Atlanta-based company produces concentrated syrup which it distributes to bottlers around the world.

Coca-Cola's history

In the year 1886, the pharmacist John Pemberton sought to produce in his laboratory a medicine for stomach problems. It was then that he produced and began to market a drink that combined coca leaves and kola nut at 5 cents per glass.

Soon, Pemberton's drink became a success and his accountant, Frank Robinson, came up with the name Coca-Cola and the logo. In 1891, together with another pharmacist named Asa Candler and his brother, as well as the accountant, The Coca-Cola Company was founded. And two years later, in 1893, the trademark was registered at the Industrial Property Registration Office.

In 1897 Coca-Cola exit the United States for the first time and in 1989 the first agreement was signed to bottle Coca-Cola for the entire North American territory. According to this agreement, The Coca-Cola Company would produce the concentrated syrup and the bottlers would make the beverage and would also be in charge of sales and distribution.

Coca-Cola's business model

We already know that The Coca-Cola Company produces the concentrated syrup that it distributes to bottlers around the world. What we have not mentioned is that the bottlers operate as a franchise system, but with exclusive territories.

Thus, in Latin America there is only Coca-Cola FEMSA and in Western Europe Coca-Cola European Partners. This is just to give an example, since there are other bottling companies that make sure Coca-Cola is present all over the world.

With this simple model, Coca-Cola went from being a beverage in a pharmacy to the largest and best known beverage company in the world. To the point that on average, everyone sees at least three Coca-Cola advertisements every day.

Best of all, Coca-Cola's marketing is always a marvel. Although it also makes use of popular beliefs such as its unknown formula that supposedly only two people in the company know about. Or the fact that it contains coca leaves in its formula.

About this we can say that it is impractical and almost impossible that only two people know the formula in such a big company. Besides, it is known that in 1903 coca leaves were replaced by caffeine, so no, it does not contain coca leaves.

And from all this what can be concluded is that, just as humanity will not stop growing, Coca-Cola will not stop growing either.

Instruments you can operate with

Meet the Exchanged Traded Fund

Exchange-Traded Funds or ETFs are similar to index funds. We can say that ETFs are halfway between stocks and funds: they can be traded like regular stocks, but include a wide diversity of assets and their commissions are much lower than those of an actively managed fund.

About Index Funds

Index funds are suitable for those who want to invest for the long term, particularly for beginners. If you don't need an amount of money for the next five or ten years, index funds offer you variety and lower risks.

Unlike a lot of people think, benchmark returns are very difficult to beat and very few fund managers achieve that, apart from some famous cases, like Warren Buffett's.

In practice, all that glitters is not gold: if a fund manager achieves to beat the market, it is only for a short period or on a specific occasion. Or perhaps they would charge very high rates and indexing would be a better decision anyway (with minimal commissions).

Index funds offer these two great benefits: although in the long term, they frequently beat active managers, and the charges are lower than you imagine.

Currency market

Forex or currency trading is the exchange between a pair of currencies in order to obtain a profit.

If you decide to trade EUR and USD, you speculate how many dollars it will take to buy a euro, with the expectation that after buying the first currency (the euro) it will increase compared to the second (the dollar), to make a profit by selling it. Suppose you entered when the price of one euro is 1.10 USD and you exit when a euro is worth 1.15: consequently, that margin will be yours once you sell back.

You may be thinking that this form of trading requires high investments, and you are not wrong, because increases in prices are never that dramatic, and if you use a lot of leverage to counter that, you will take a considerable risk. In case you are new to the world of trading, we don't recommend beginning with Forex, because it's not the safest option.

This broker allows trading with the most popular currency pairs but take into account that in Forex sales are made through contract for differences, thus you will not be the owner of the real asset.

How do Contracts for Difference work?

If you browsed this broker previously, you must have noticed that the acronym CFD appears over and over. We will explain its meaning now, but you should know first that CFDs on this broker are only possible when you are short-selling.

We will also explain concepts like leverage and “going short”, in case you are thinking about day trading cryptocurrency or more advanced operations.

Even if you don't have a positive balance, you can still bet on this broker with CFDs. Let's say that you are sure that the Coca-Cola will go down, so the logical thing is to think “if it is going to depreciate (go down in price), I'll simply wait until it does”. Nevertheless, if it really goes down, it is possible to make some profits out of that.

You can do this through what is known known as “going short” which consists in something like the following:

  • They lend you, let's say, 100 units of Coca-Cola, with a total price of $ 5,000 (these are completely fictional figures)
  • You make $ 5,000 by selling the 100 units
  • As you supposed, it depreciates, and the unit of Coca-Cola now costs $ 30 instead of $ 50
  • You obtain the 100 units again, but at $ 3,000
  • You return the 100 units to the person that loaned them to you
  • There: the $ 2000 difference is yours

It all seems more complex than it really is. Just know that by trading in Coca-Cola on this broker, with CFDs you can earn money if you foretell downs in the price.

Leverage: more risk, more gains

If you still don't know what “leverage” is, we'll put it short: it is the ability to invest a higher amount than you actually have. For example, you can enter with $ 100, but if you use x2 leverage, you will be investing $ 200.

Leverage and the importance of “Take Profit” and “Stop Loss”

Let's say that you are confident that Coca-Cola will raise its price, and you want to “go long”, but you only have $ 1,000 available. However, it is possible to put more and earn higher profits.

There's the possibility of asking for a credit at your bank or other financial company, but it is a process that takes time, and when you receive the money, Coca-Cola might be already so expensive (if your guess was right) that trading wouldn't be convenient anymore.

Leverage is like a credit, and you will only have to click a few times! your broker allows you to invest (and earn) much more than what you have on the platform's wallet. Before trading, you will how much leverage to use as in the screenshot below:

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When operating in different markets you can use higher leverage. Why? Because leverage is most common in short-term operations, and cryptocurrencies tend to be a medium or long-term investment. That said, I'm going to explain better how leverage works:

  • If you decide to invest $ 1,000 and you use leverage x2, you will be starting with $ 2,000 (remember that$ 1,000 are a “loan” from your broker). 
  • A few days later, Coca-Cola price does increases, as you assumed, and now the cost of your investment is $ 2,400 (20% higher), so you decide to sell back because you want to play it safe. 
  • The $ 1k of leverage will be deducted, and you will have $ 1,400 left; which means the net profit is $ 400, since the other $1,000 was yours initially.

In conclusion, by investing $ 1000 and obtaining $ 400, your net profit would be 40%. That is pretty decent.

Does it sound too wonderful? The trick is that the risk of losing out also increases. If everything goes as planned, you will earn profits in little time; but in the opposite case, you will also lose more really quickly.

For instance: if the price falls by 10%, you won't lose $ 10, but $ 20. Therefore, when using leverage it is essential to know about Take Profit and Stop Loss.

Take Profit is used as a form of reducing risks when trading. When you enter, you can set a profit limit and ask that your position is automatically closed when the asset reaches a price. 

If you purchased Coca-Cola shares at $ 100, you can ask your broker to close once it reaches $ 120. That way, you make sure you won't be blinded by greed and decide to wait a bit longer in case it keeps going up, which could be a mistake.

Also, if you use leverage you absolutely need to place a Stop Loss order (take into account that any small loss is greater with leverage). Consider that the broker will recommend a limit for Stop Loss, but you should set it lower than the platform suggests.