How To Make Money From Nigerian Stock Exchange Without Trading Shares Yourself – Let Professional Mutual Funds Pick Top Performing Stocks, Invest for You While Your Get Returns.
After the 2008 global market crash that led to massive stock sell-off, sending the NSE index to an all-time low, interest in the Nigerian stock exchange market seems to be gathering momentum again. The equities market posted one of the best impressive performance of 42% in 2017; thanks to the reversed bullish trend in the oil market and innovative investors’ and exporters’ window introduced by the CBN to help make forex available at a market-determined rate without intervention.
This return which was far better than -16.1%, -17.4% and -6.2% in 2014, 2015 and 2016 respectively, was driven by Dangote Sugar Refinery (227%), International Breweries (195%), and Fidelity bank (193%). Other notable stocks that contributed to this positive close were Fidson, Stanbic IBTC, First Bank, UBA, NASCON and Nestle.
Since this news broke out early this year, I have been receiving several emails from my blog visitors and messages from retail traders on the best stocks to buy. The interesting discoveries in these messages emails were that these senders weren’t experienced in stock market trading; no prior knowledge of the stock market investment or technical analysis of stocks, yet, they just wanted a simple and low-risk guide to taking their share of the potential wealth-creating opportunities in the stock market.
This is not even a local trend, foreign investors have are also keying into the trend.
Investors’ participation, at both local and foreign level, in the NSE market is now higher than it was last year. While foreign portfolio investment is up by 59% to N132bn (against N82bn in February 2017), local investors have expanded their money flows by 51.48% to N140bn (against N128bn) (Source).
This actually shows that local investors invested more money than foreign investors.
This is a summary of the transaction flows from foreign and local investors. You will notice the spike from N83.22bn to N132bn; a lot of hot money is currently flowing to the financial market right now. Besides, as of 2018 YTD, local investors currently hold 56.56% of the market transaction while 43.44% is from foreign investors.
What did you see from this analysis? interest in the local stock market is at all-time high right now but what percentage of this traders are experienced and professionals traders? I can confidently say that only a few are actually making the real money.
As a smart beginner who isn’t a genius in the stock market but would like to invest in stocks, here is what you should do: instead of using trial and errors to pick stocks and lose money, isn’t it smarter to look for professionals that have a track record of positive returns in the stock market.
A brief look at mutual funds and their performance:
Mutual funds are professionally managed investment funds that pool money from investors to buy securities. While some funds are sector-focused, others are diversified. Your focus here is to look at equity funds; mutual funds that invested in listed securities for medium to long-term capital appreciation.
In Nigeria, we have a lot of professionally managed mutual funds that are creating more wealth for their retail clients. Why not find one, let them manage your money for you while you focus on other businesses?
Let’s take a look at some mutual funds and their performance in 2017:
In percentage terms, FCMB Legacy Equity Fund topped the list to post the best return of 52%, followed by ARM Aggressive Growth Fund (46%) and FBN Nigeria Smart Beta Equity Fund (45%). While the past performance isn’t a key determinant of the future trend, it still serves as a guide to selecting the fund to select.
Here is my guide, I love equity funds not only posted positive return (above inflation figure of 14%) but also beats the NSE market index.
As of this writing, we had just concluded the first quarter of 2018, let’s look at the top mutual funds that are posting market-beating returns above NSE index of 7%:
- Meristem Equity Mutual Fund – This fund, owned by Meristem securities, focus on high-quality equities securities for long-term capital gain. Meristem Equity Fund created more wealth by 41% in 2017 and as at the end of Q1, 2018, it is already up by 17%.
- If you had invested N1m in January 2018, in 3 months, you would have added N170,000 ( which is far better than fixed deposits or treasury bill).
- Stanbic IBTC Aggressive Fund – When I contacted Stanbic IBTC to know more about this fund, they said, it’s targeted at high-class investors who can invest a minimum of N20m. While 60% of the fund is invested in equities, 40% is in fixed income market. Stanbic IBTC Aggressive fund posted 41% return in 2017. So far, the fund is up by 12.58% in Q1, 2018
- If you had invested N1m in January 2018, in 3 months, you would have added a gain of N125, 800 to your investment.
- Frontier Fund – This fund’s primary objective is to build long-term wealth for its clients by investing in carefully selected equities and money market securities. The fund gained 22% in 2017 but has now moved up to the ladder to be among the top 3 in the first quarter, up by 10.55%.
- If you had invested N1m, you should have added N105,500 to your mutual fund portfolio in 3 months.
- UBA Equity Fund – This fund is suitable for investors with a long-term outlook. It uses an internally generated fact-sheet to pick stocks that will deliver a long-term capital gain. The fund grew her client’s wealth by 41% in 2017 and also already up by 10.45% in Q1, 2018.
- If you had invested N1m, your investment, at the end of March 2018, would have increased by N104,500.
While these aren’t a mutual recommendation, I shared this investing guide to let you know that, even if you don’t know how to pick stocks, there are still alternative wealth-creation opportunities you can explore in the Nigerian stock market.
So, when you think of how to make money from Nigerian stock exchange market without spending hours analysing stocks or reading financial statements, go find a professional equity mutual funds that have good track records.