Continued from part 1 of Making Investments for the Future: How best to go about it
Eurobonds are internationally traded debt instruments denominated in currencies other than the currency of the country where it is issued. For instance, the federal government of Nigeria seeking to raise US$2 billion can post eurobonds in the UK. Since it is an international instrument, Nigerians with dollar currencies can also buy into these bonds.
Therefore, when making investments, you might want to consider the option of investing in eurobonds if your money is denominated in foreign currency.
Eurobonds are relatively stable and safe, and allow investors to diversify their investment portfolios. Investing across a number of currencies reduces your risk of losing so much value for fluctuations in certain currencies.
However, since eurobonds are usually denominated in currencies different from that used in the country where there are issued, there is the risk of foreign exchange fluctuations associated with eurobonds.
Stocks in Bluechip Companies
Stocks of bluechip companies are usually traded on the floor of the Nigerian stock exchange. By investing in these stocks, you theoretically become a co-owner of the company. However, it must be noted that the market value of these stocks vacillate so much that the risk becomes very high.
Again, it has been observed that many of the bluechip corporations in Nigeria are not maintaining good corporate governance practices in their operations. Hence, operating costs become so high that profits and by extension, return on investments become so very low.
As a classical example, a N100,000 worth of stock I bought in one of Nigeria’s commercial money banks in 2017 is now worth less than N20,000. That’s an 80% reduction in stock value.
Therefore, in my own opinion, when considering making investments, buying stocks in some of the listed corporations around here most especially financial institutions isn’t the best way to go at all.
One of the ways of investing your funds could be by financing startups that need funding to launch their products. The advantage here is that you could buy a very large part of the business for a relative small amount of money and if the business grows and becomes super successful in future, your net-worth grows meteorically. Another advantage here is that you have relatively more control of the business compared to when investing in the large corporations.
However, you must note that investment in startups is the most risky investment option among those mentioned here. Of course the very high risk comes with very high return on investment if the startup is properly managed and successful.
Therefore, if you’re a young person who isn’t averse to taking risk and you want to quickly build your net-worth, then investment in startups is the way to go.
Do you know that with as low as N10,000, you can invest in a startup for a significant share of the business. This is not obtainable if you’re investing in larger corporations.
So, how do you reduce your risk exposure when investing in startups?
Diversify your investment portfolio and invest more in tech startups. Why tech? Because tech startups are easier to scale and are less likely to fail given the huge global market for tech products.
Invest also in startups in agricultural value chains especially agricultural processing and value added products. Why agriculture? That’s because people will always eat. Why agric. processing? That’s because while the agricultural commodity markets fluctuate a lot, the food or finished product market is fairly stable and even appreciates.
While it is an absolute necessity that you invest your disposable income for the future, the modalities for making investments are absolutely up to you. Depending on your circumstance and your desires, you can choose any of the above investment options. But, as always, please ensure you learn more about any of the options you choose before making any investment.
If you’re confused about anything regarding the above article or need further guidance on making right investment decisions, please email email@example.com or whatsapp chat +2348163052034.
Good luck as you invest for the future.
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