“Where do I invest in this Covid-19 era” - If you are a young man or woman looking for investment opportunities, this would be the million-dollar question on your mind now.
The outbreak of the Corona virus (COVID-19) pandemic has pushed the global economy, not just Nigeria’s economy, to a breaking point. The IMF (International Monetary Fund) recently broke the news that the global economy is in a recession of almost the same weight as the 2008/9 global melt-down.
However, do not be troubled; there is a silver lining in the clouds. While governments go to IMF for relief funds and loans, there is always room for an investor to make significant gains by investing in the stock market especially during a recession or market crash.
As Warren Buffet would often say, “Be fearful when others are greedy and be greedy when others are fearful.” In other words, get into the stock market when others are afraid to do so (during a market decline) and exit the market when others do not want to do so (during a market boom). This will remain the gold rule of investing in the stock market.
That said, let us explore investment opportunities during the Covid-19 era. There are 3 high yield investment options for investors in the Nigerian market:
1. Equities: The prices of stocks on the Nigerian Stock Exchange have crashed to the lowest since the 2008/9 financial crises. This is the right time for an investor to hunt for bargains. An investor can purchase these stocks at give-away prices and make great returns when the market bounces back. Sectors of the equity market with great prospects are: Telecommunications (e.g. MTN stocks), Materials (e.g. Dangote Cement stocks), Banking (e.g. Guaranty and Zenith stocks), Fast-Moving Consumer goods (e.g. Nestle stocks), Pharmaceuticals (e.g. Maybaker stocks), Insurance (e.g. Mansard) are excellent options.
2. Naira-denominated Fixed Income Instruments: These are investments in naira such as fixed deposit, money market funds, and bonds. Some of them offer as high as 8% return per annum. It is preferable to inquire about investment options from trusted financial institutions and asset management firms in Nigeria since they offer a higher interest rate than commercial banks. An example of such a financial institution is Meristem Securities Limited.
3. Dollar-denominated Fixed Income Instruments: These are investments denominated in dollars. They include Eurobonds (bonds denominated in dollars which pay coupons every 6 months). Dividends/payments received on bonds are called coupons. You can also invest in other dollar investment options with trusted financial institutions and asset management firms in Nigeria. The importance of having dollar-denominated fixed income instruments is that they protect the investor against naira devaluation. Naira has currently declined in value by 15.27% (from N360/$1 to N415/$1) as at 13th April 2020. We cannot tell how much further it will decline in the future. It is therefore important for all investors to preserve the value of their funds in dollars or any other foreign currency of their choice.
We hope this answers your question of “Where to invest in this Covid-19 era”. Go ahead. Take the leap and make great gains post Covid-19.
Still craving? Explore on Meristem Research
Article Credit: Hephzber Ifunanya Nwoka