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This Short term Investment Strategy Offers Higher Return above T-Bills

Short term Investment Opportunity in Nigeria with High Returns 2019 – Best High Yield Investment Options to Make Guaranteed Income from Nigeria Stock Market.

Short-term investments, also known as liquid investments, are investments that mature in 6 months to 1 year. Unlike long-term investments, which is believed to offer higher yield over time, short-term investments typically come with lower risks, no wonder the returns are smaller.

When it comes to selecting the best options for your money, there is countless advice on why and how investing in long-term securities will help you accumulate wealth. But in the course of our day to day financial life, we frequently find ourselves in need of short-term cash flows to finance immediate needs which is why we must also seek investment opportunities that won’t take decades to build up and yet offer steady, low-risk and guaranteed return.

Ordinarily, the deposit account and CBN Treasury Bills are not only considered the best ideas but had been the widely adopted short-term investment options for amateur investors. But, the statistically-proven idea shared here will help you maximize the return on the cash in your savings account.

Although, you can’t rule out the risk involved, the combination of market timing and some level of exposure to government-backed securities will surely lower your risk. The average return on your investment can vary from 15% to30% in a 5-6 months

Who is this strategy suitable for:

  • Folks with idle cash in the bank
  • Folks that are looking for high return opportunities and at the same want to preserve their capital.
  • Folks that can invest now and wait for 6-12 months before exit.

Best Short-term Investment Opportunities with Higher Return

The two best investment options are Dividend Paying Stocks and Treasury Bills.

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While you are wondering why dividend-paying stocks should be considered the best place investments for short term when the cash payout is small, please note that you aren’t buying these stocks for dividend purpose but to take advantage of the institutional money that flows into stock with an attractive dividend yield, then sell before the closure date.

Typically, when a company beats its previous financial records and is expected to increase dividend payout in the current year, investors would naturally flock to the stock when it is time to pay a cash dividend to shareholders whose names are registered before the closure date. An influx like this leads to a higher share price as buyers bid on the stock ahead of the payment date.

What you should do at this point is to scout for stocks that pass my 6 checklists for picking great dividend stocks and accumulate certain units at a lower price, like 5-6 months before the closure date. For instance, most listed stocks in the Nigeria stock market release their end of the year results (December) around February and March. Dividend payment date (which will be announced) usually falls between May and June. Between January to April/May, there is what analysts call “First Half-year optimism rally” while July to November is tagged “Second Half Pessimism rally

According to a research published by the BusinessDay Newspaper on 19th, November 2018 titled: How Investors Missed Out on Decades of Easy Profit, it was revealed that, in the first half of the year since 2000, the stock market has delivered positive returns 16 out of 18 years while in the second half of the year, the market has rallied 9 times out of the 18 years (from 2000 to 2018). This means that if you were a probability driven technical investor, you will see easily that there is an 88% chance of an upside in the stock market in the first half of the year and a 50% chance of suffering a market loss in the market in the second half of the year.

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If an investor invested only in the first half of the year between 2000 and 2018, he would have earned an average annual return on his portfolio of around 14.23% versus an average annual portfolio loss of around 0.58% if he only invested in the second half of the year. This performance only assumed that the investor holds in his portfolio all the companies in the stock market at a market weight, (or bought the NSE index fund).

For investors looking for short-term opportunities in the stock market, if you had invested N10,000,000 in the year 2000 in using the H1 optimistic rally strategy, you would have grown to N100,000,000 as at the end of H1 in 2018, providing you with almost 10x return. If you had done the same in an H2 only portfolio, you will be N9,590,000 as at now. (November 2018).

While some analysts have tried to give different reasons for this historical stock market rally, we believe that the market can’t come close to efficiency. For me personally, I found one particular reason for such rally which is a great opportunity for short-term players and that is dividend investing.  A lot of corporate actions are released to the investing public between February and May with the company’s shareholders’ closure date for dividend qualifications falling in the same period.

Besides, a larger number of stocks that offer attractive dividend above market average are found at this period and if you miss it, you might not find any again till the following year. So, it is natural for big funds from insurance companies, pension fund managers, asset and investment managers to chase these stocks at this period hence push the share price to the north, after the closure date, they liquidate their holding since they are already qualified for dividend payment.

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This explains the usual rally you see every first half of the year. So, your entry as a short-term trader is to screen for stocks that offer attractive dividend yield above 8-10% using my 6 criteria, buy at a lower price around November and December and sell before the closure date (you will see notifications under corporate action). This strategy can net you a modest 15-30%.

Where will I invest for the remaining part of the year? you can explore the money market by investing in Treasury Bills or put your money in a safe fixed income mutual fund with positive historical track records.

While this short-term investment opportunity in Nigeria has been proven to generate impressive returns over an 18 year period, it is not devoid of risk, hence, due diligence is required when picking Nigeria stocks to buy.

If you follow my guide on how you should invest your money, this short-term opportunity is suitable for young and aggressive investors below 40 years and not for aged folks.

What do you think?

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