Discover the various low-risk short-term investment opportunities in Nigeria for 2023 and learn how to diversify your portfolio effectively.
Investors’ philosophies vary greatly.
Some relish the thrill of immediate returns and rapid profits, akin to a high-stakes poker game, while others appreciate the steady, methodical growth that can be likened to a chess match, each move calculated and future-focused.
But isn’t there merit in dipping your toes in both pools to gauge their temperature?
Each Approach Has Its Merits
It’s important to remember that each investment strategy has its champions.
Comparing them can be akin to contrasting apples and oranges.
Long-term investments such as stocks have paved the road to riches for some, while others find prosperity in short-term bonds or swift profit-making opportunities.
Unlocking Short-Term Investment Success in 2023
How does one navigate the short-term investment waters in 2023?
The compass to successful short-term investing points to one fundamental truth: don’t let greed steer you off course.
Tempting as it may be to reach for outlandish returns, beware of the sirens of investment fraud. Those promising swift and extraordinary gains often lead to financial shipwreck.
A Pragmatic Approach to Short-Term Investments
Short-term investments should not be viewed as a get-rich-quick scheme but as a financial shield protecting your assets from the blight of inflation.
Low-Risk Short-Term Investment Opportunities in 2023
Commercial Papers
Consider commercial papers as your financial shorthand for a low-risk investment.
These unsecured promissory notes provide a fixed rate of interest and are commonly issued by large banks or corporations.
For example, MTN Nigeria issued 188-day commercial papers with an 11.00% yield and 267-day commercial papers with a 12.50% yield in May.
A N1 million investment in the 188-day commercial paper would generate N1,057,444.44.
Keep a keen eye on financial reports and subscribe to financial service providers to seize these opportunities.
Mutual Funds
Dive into the relatively calm waters of mutual funds for a safer investment journey.
Expert professionals manage these funds, curating a portfolio that balances risk and return.
Take the Stanbic IBTC Dollar Mutual Funds as an example, with a year-to-date return of 2%.
A N1m investment in this fund would grow to about N1,020,000. Other investment firms like ARM and United Capital also offer mutual funds.
FGN Bonds
Investing in FGN Bonds can be compared to planting an orchard with the Nigerian government promising a fruitful harvest.
The Nigerian Debt Management Office (DMO) issues these bonds, proclaiming them as “risk-free”.
Although the FGN 10Y bond with a 14.49% yield might not align with the short-term narrative, shorter-term bonds are also available.
Exchange Traded Funds (ETFs)
ETFs, though sometimes puzzling to newcomers, offer a buffet of assets.
Think of ETFs as a way to invest in a portfolio of companies, with their collective performance guiding your returns.
For instance, investing in the Dow Jones Index DJI is akin to backing the top 30 manufacturing companies in the US.
Despite the risk of a significant decline during a global financial crisis, the collective performance helps cushion potential losses.
Investing Across Instruments: The Key to Reducing Risk
To conclude, suppose you’re an investor with N5 million.
In that case, you might consider sprinkling your money across these various financial instruments, a strategy known as diversification.
This approach can potentially dilute your risk, spreading it across various channels.
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FAQs
What are the key principles of short-term investing?
Patience and pragmatism are essential. Do not expect extraordinary gains from short-term investments.
Are commercial papers a good short-term investment?
Yes, especially if issued by reputable companies offering a reasonable yield.
Are mutual funds considered a safe investment?
While no investment is 100% risk-free, mutual funds, managed by expert professionals, are typically a safer bet.
Are FGN bonds risk-free?
The Nigerian Debt Management Office claims so, although investors should always conduct their own risk assessment.
What is the role of ETFs in a diversified portfolio?
ETFs allow investors to distribute their investments across a broad range of assets, thereby spreading and potentially reducing risk.
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