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Best Investment Opportunities In Nigeria for Long and Short Term. High Yield Financial Investments With Monthly, Quarterly, & Annual Returns on Your Money 2018, 2019 – Forex, Dividend Stocks, Treasury Bills, FGN Bonds.
Selecting the right investment options for your idle cash isn’t an easy one; a lot of factors should be considered especially now that the investment world is full of uncertainties.
See – How to Invest in Nigerian Banks
In this investing guide, you will learn how to pick the best investment opportunities for the long or short-term horizon based on your preference and personal appetite for risk:
Key Investing Questions to Ask:
When looking for an investment opportunity, you need to ask yourself these questions:
- Is this investible cash a percentage of my total cash balance or everything; “home and abroad”? Assuming you have N10 million in your life savings account and are looking for long or short term investment opportunities in Nigeria, the way you would invest N1 million, which is 10% of your N10 million cash balance, will definitely be different from your mindset if the whole N10 million is to be invested. A smart investor would rather take on lower risk opportunities on N10 million investment and higher risk on N1million.
- So, when you are looking for a place to invest in, consider the percentage of what you are investing to your life savings; lower risk for 30 – 100% and higher risk on 20% or less.
- How old am I? As dumb as this question sounds, it is also critical to determining where to invest your cash. You would be sharing a disastrous advice if you encourage a 60-year old man to go invest 70% of his life savings in the stock market. What happens when the market crashes? that is a short route to high blood pressure.
- So, check your age range for better portfolio rebalancing; ages between 20 – 40 can invest actively in the stock market but as you grew older to 50, fixed income securities make more sense; what you need is an opportunity that generates monthly quarterly, semi-annual or annual cash flow return.
- What level of risk am I willing to take? Every investment comes with a risk. The risk is the possibilities that your actual return may vary from the expected outcome; it could be higher or lower. In the investment world, lower risk opportunities tend to offer a lower return while high-risk opportunities usually offer an above-average return on your investment.
If you can provide honest answers to the following questions, you will find it easier to know which investment option is right for you.
Let me share some of the best investment opportunities in Nigeria based on the questions asked earlier:
- For someone who is willing to invest 20% of his life savings, still below 40 years and wants to get ideas for short or long-term horizon, here are my tips:
- For short term; buy growth stocks in a sound company, trade forex or commodities market, invest in growth mutual funds or start an online business.
- For long-term: buy dividend stocks, and, FGN bond and fixed income mutual funds.
- For someone who is willing to invest his life savings and above 50 years:
- For short term: buy Treasury bills, invest in 90-days fixed deposit, and invest in fixed income money market.
- For long-term: buy FGN bond, invest in fixed income mutual funds, buy dividend stocks in a blue chip company and insurance annuities.
This is how you should consider and screen different options before deciding whether you want to go ahead.
As a beginner or a novice who doesn’t understand some of these investment ideas, let me share a brief information about them:
Dividend Stocks:
These are stocks that pay parts of our profit to shareholders; the cash payout is referred to as a dividend. Dividend stocks are great for investors looking for cash flow and as more buyers accumulate the shares of the company, prices tend to rise. Some of the best companies that pay dividends in the Nigeria stock market are Nestle, Unilever, Zenith Bank, GTBank, UBA, etc.
See – My Checklist for picking good dividend income stocks
Treasury Bills
Treasury Bill, also known as T-bills are short-term fixed income debt instruments issued by the CBN at a regular auction. T-Bills could be 30-days, 90-days, 180-days or 364-days with varying interest rates. The higher the maturity period, the higher your return.
When you buy T-Bills through your bank. depending on the type, an interest is paid upfront and credited to your account with the principal repaid on the expiration of the investment.
For instance, If you invest N1,000,000 in a 364-day T-Bills which, as of this writing, offers 14.95% interest, N850, 500 will be deducted from your initial investment leaving you with an upfront interest of N149,500. At the end of the 364 days period, your principal (N1,000,000) will be credited back into your account.
For lower T-Bills duration like 90-days, the calculation isn’t direct as you think; let us assume you opted for a 90-day T-Bills offer of 10.2%, your upfront interest isn’t N102,000 but N25,000.
Here is how to arrive at your interest payment: 90/360 (prorate the 90 days in a year ) x 0.102 (interest percentage) x N1,000,000 invested.
FGN Bond
Every year, the federal government (FGN) drafts its annual budget which contains a forecasted expenditure and expected revenue. As a way to generate more revenue for capital and recurrent expenditures, the FGN had always explored debt market if the cash flow from oil and taxes aren’t enough. One of the debt instrument issued by the government to raise more money for long-term capital projects is “Bond”.
A bond is a long-term debt instrument issued by the government to raise money for long-term projects; we have infrastructural bonds, SUKUK bond, green bonds, and savings bond. At the state level, some state governments issue state bond to finance state projects.
FGN bond pays interest semi-annually; every six months to bond holders directly to their account up till the maturity period after which the principal is paid back.
Mutual Funds
Mutual funds are a collective investment scheme that pools resources together for a common purpose. The funds could be invested in Treasury bills, bonds, the stock market or a mix of all these opportunities. Since they are managed by regulated professionals, it is considered safe for investors with little or no knowledge of the market.
In Nigeria, you can select:
- Equity Funds, if you have a high appetite for risk.
- Fixed Income Fund, for T-Bills, Bonds and Commercial Papers.
- Balance Fund, a combination of equity and fixed income opportunities.
See – Top Low-Risk Mutual Funds to Invest In
Insurance Annuities
Under annuity plan, you would be expected chose a plan and pay a fixed calculated premium on a monthly quarterly or annual basis for a specified period of years after which, the insurance company will pay you for life. This option is considered safe for all investors as its help one plan for the future. Some insurance companies like AIICO, Mansard, NEM, Custodian offers annuity insurance products.
While these are the best investment opportunities in Nigeria for short or long-term horizon, you are free to share more profitable emerging business opportunities that are not yet tapped.
