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9 verified ways to invest money for good returns in Nigeria

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Investing is a necessity if you want to expand your money and stay on top of rising inflation. Due to inflation, money retained in cash loses its purchasing power over time. For example, not long ago, you could buy a bag of water at the price of 100 Naira but today, you would have to spend twice that. As a result, if you have not invested in a worthwhile instrument, your monthly salary savings may be losing value every day.

When choosing an investment tool, it is usually better if you can invest both your money and your time. However, for people who don’t have a lot of time to devote to research, there are a few investment options that won’t take up much of your time. We have listed 9 ways verified ways to invest money in Nigeria today.

Mutual funds

Mutual funds are pooled investment vehicles in which a professional fund manager manages your money according to the fund’s goals. Each investor’s investment amount is pooled to form the Asset Under Management (AUM), which is subsequently invested in proper capital markets such as equities, bonds, commodities, and so on. In Nigeria, people who want to invest in mutual funds can apply for funds or open accounts with SEC-approved mutual fund service providers and asset management firms.

Mutual funds are particularly helpful for Nigerians who work full-time since they eliminate the need to analyze markets and monitor pricing. However, you must check the track record of mutual funds that you are putting money into. For example, only look for funds that have performed well in the last 10 years by looking at the fund’s past performance, and then reading their prospectus to see what assets they are investing in, as well as their terms and risks.

Fixed deposits

Many Nigerian banks allow customers to open a fixed deposit account. This account allows you to invest a set amount of money for a set length of time at a predetermined fixed interest rate. The interest rates offered by each bank in Nigeria may differ, so it is important to examine and compare the rates before investing. Depending on the period of the deposit, different banks might give interest rates ranging from 4% to 13.8%. The deposit term might be anywhere from 30 to 360 days. On their website, under the heading “Deposit and Lending Rates in the Banking Industry,” the CBN publishes the interest rates of all banks regularly. While making your decision, you can examine and compare these rates.

Creating a fixed-income bank account is comparable to opening a regular savings account, but there is a term before which you cannot cancel the deposit without forfeiting a portion of the interest. Before opening a fixed or tenured deposit account, investors should double-check the period and interest rate, as well as any other terms and conditions.

Bonds

Bonds are low-risk investment vehicles that are excellent for many individuals who have limited tolerance for risk. The government and corporations both issue these to raise capital. Each bond has a predetermined maturity period and interest rate. Each bond is subject to the risk of default, which occurs when the issuer fails to deliver the guaranteed payment on time. The default risk is determined by the bond’s credit rating.

Government-issued bonds receive the highest ratings since they are backed by tax revenue. FGN bonds are an example of a government bond. As a result, these bonds will most likely pay the lowest interest rate. Bonds with a lower credit rating will most likely have higher interest rates. Bond investments are also vulnerable to inflation risk. Returns on government-issued bonds frequently fall below the rate of inflation, reducing the value of the investment. On NGX, you can trade both government and corporate bonds.

Real estate investing

Real estate is regarded as a low-risk investment with a large investment amount. In the past, real estate values in Nigeria have risen significantly over time. Investors might profit from renting or leasing a property in addition to buying and selling it at a higher price.

The disadvantage of real estate investing is that it necessitates a large initial investment, with far lower liquidity than any other capital market. People who buy and sell real estate, as well as people who want to get out of their investment, can be hard to find.

Investing in dividend stocks

Under typical circumstances, stock investments require the investor to research the firm and keep a close eye on price movements. A full-time employee may not be able to afford to invest in growth and value equities. As a result, such investors should opt for less volatile dividend-paying equities on the Nigerian Stock Exchange (NGX). The ability to pay dividends should be taken into account when choosing long-term stocks.

Nigerian investors can invest in dividend stocks by opening an account with a stockbroker authorized by the Nigerian Stock Exchange (NGX). Although dividend and premium stocks are less volatile than others, they nevertheless carry market risk. Before investing, people should think about the risks and see if the stocks they want to buy are right for them.

Forex

Foreign exchange, or forex, refers to the purchasing and selling of one currency for another. Traders typically trade currencies such as EURUSD, GBPUSD, and others. Online forex trading is not yet regulated in Nigeria, but it is not prohibited. Nigeria has the largest number of forex traders in Africa, with over 200,000 merchants. Nigerian traders trade forex with foreign forex brokers who accept Nigerian traders, and all of these brokers are regulated and licensed by foreign regulatory bodies such as the FCA in the United Kingdom and the FSCA in South Africa. In Nigeria, no forex brokers are regulated by the Central Bank of Nigeria (CBN) or the Securities and Exchange Commission (SEC).

However, it’s important to note that trading is one of the most difficult ways to profit quickly from the stock market. Correctly analyzing price fluctuations in the short term necessitates a significant amount of effort. Even after a thorough investigation, there are a number of risk factors that must be evaluated and reduced to acceptable levels. Most people who start trading on the internet lose money because they don’t spend enough time researching and analyzing.

CFD Trading

CFDs are a sort of derivative market in which only the price movement of the underlying securities is bet on. CFDs on currencies, indices, commodities, stocks, cryptocurrencies and other assets are available to traders. In Nigeria, there are currently no regulated CFD brokers for retail traders. Nigerian traders use overseas authorized brokers to trade these instruments.

CFDs make it possible to trade instruments that would otherwise be unavailable to ordinary Nigerian investors. With leverage, you can start a larger position with a smaller deposit. However, it is not suitable for beginner traders. The risk level is considerable, so it may not be suitable for cautious investors and traders.

Stocks

Stocks are the most common type of investment, and they allow you to buy and sell shares in a publicly-traded corporation. When you buy shares in a firm, you become a part-owner, and the price of those shares is affected by the company’s growth and decline.

Any of the NGX licensed brokers can help investors purchase and sell shares of a publicly-traded firm. The Nigerian Stock Exchange currently has 155 businesses listed. Each broker has its own set of features and might charge a different brokerage fee for the services they provide.

Over the medium to long term, stock investments can produce great profits, but they are risky. Before investing, investors should conduct thorough research and analysis of the stocks.

Debt

Entities raise capital by issuing debt, bonds, or fixed-income securities. Governments, banks, corporations, and other organizations are examples of these entities. After a certain amount of time, the bond is sold by its issuer, who promises to pay back the principal and interest after that amount of time has passed.

The issuer can also make coupons, which are payments made at regular intervals. The repayment of zero-coupon bonds occurs at the end of the term. Before you buy a bond, check the interest rate, coupon, term, credit rating, and terms and conditions.

Conclusion

There are a variety of investment opportunities in Nigeria to be explored. Banking opportunities, cryptocurrencies, and real estate are just a few examples.

The location could be a deciding factor well before you consider the big move. This could be a stumbling block to acquiring the finest investment in Nigeria. Overall, make sure you consider all of your financial possibilities before making any decisions. Nigeria has a wide range of financial instruments to choose from.

Investors should not focus solely on the products that generate the best returns. Before choosing an instrument, each risk element related to the investment objective must be evaluated. For financial decisions, investors should not rely on recommendations from friends or relatives. Rather, they should take the time to study the investment option they prefer and the risks involved.

Have you invested in any of the listed alternatives?

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