1. Stocks /Shares:
This is simply investing in the stocks of companies. The rule of the thumb is to buy low and sell high. This is a growth investment but quite risky as we all know, the higher the risk involved, the higher the return if played well. In the stock market, always know when to stop speculating and make your gain. A stitch in time saves nine especially in a very unstable economic climate like Nigeria. There are 2 forms of return from investing in stocks:
a) Dividends: This is interest paid on the stock investment periodically, depending on the company from their net profit.
b) Share price increase: This is basically an appreaciable increase in the purchase price relative to the current price. In the stock market, diversification is key. For some very good companies who have shown historical growth over time, holding the stock for a long time can yield positive outcomes.
2. Real Estate
This is also a growth investment and is quite safe, all things being equal. It is also a good store of wealth and a good source of wealth. Most wealthy folks are huge players in this market e.g. Warren Buffet. Same rule of the thumb just as the stock market, buy low and sell high. Another important consideration is LOCATION. This is key in generating good rental income and also in influencing the rise in the price of the property.
3. Bonds /Fixed Income
This is a fixed interest investment with long term perspective. It’s sort of an IOU from the government or other issuer (e.g. corporates). It usually comes with attractive rates in stable economies. For any cash investment always compare the rate with the current rate of inflation. Any investment that is much less than the inflation rate is not a profitable investment. However, can be kept for speculative purpose or as emergency fund.
4. Cash (Money Market Instruments, treasury bills, savings etc.)
This is mostly good during periods of high interest rate. During inflationary periods, the gain on interest, might be eroded quickly. Savings is good especially as a form of target savings towards another investment or a source of emergency funds. Treasury bills are discounted instruments lent to the Federal Government. Minimum investment in Nigeria in N500,000.00. Money Market Instruments are all other forms of fixed deposit investments that are short tenured.
5. Mutual Funds
This is a pool of funds from different investors for the sole purpose of reinvesting in any of the above mentioned except real estate. For real estate, it is called Crowd funding. This is particularly good for those we do not have the time to devote into monitoring the movements in the stock market or money market. This is also a form of diversified portfolio where you allow experts to invest in different stock or cash instruments while you earn a percentage return on the various investments. Fortunately, in Nigeria, there are several forms of mutual funds either money market funds, equity market funds or a hybrid of both.
Other forms of investments are commodities, FX futures, gold, collectibles (antique cars, stamps etc.) and of course speculative investments like cryptocurrencies.
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