January 25, 2022 All Things Fintech in Africa

How To Invest in Mutual Funds in Nigeria

How To Invest in Mutual Funds in Nigeria

This article is designed to teach every one of our readers how to invest in mutual funds and it is a straightforward manual on How To Invest in Mutual Funds in Nigeria

What are mutual funds

Mutual funds could be a form of the monetary vehicle created with a pool of cash collected from several investors to take a position in securities like stocks, bonds, securities industry instruments, and different assets. Mutual funds are always operated by skilled cash or liquid managers, whose role and assignment is to apportion the fund’s assets and maintained to turn out capital gains or financial gain for the fund’s investors. A mutual fund’s portfolio is structured and maintained to match the investment objectives explicitly stated in its prospectus.

Mutual funds offer tiny or individual investors access to professionally managed portfolios of equities, bonds, and alternative securities. every stockholder, therefore, participates proportionately within the gains or losses of the fund. Mutual funds invest in an exceedingly huge range of securities, and performance is typically tracked because of the amendment within the total market cap of the fund—derived by the aggregating performance of the underlying investments.

Types of mutual funds

Mutual funds are divided into many sorts of types, representing the sorts of securities they need to be targeted for his or her portfolios and also the form of returns they ask for. There is a fund for nearly every form of capitalist or investment approach. alternative common sorts of mutual funds embrace securities industry funds, sector funds, various funds, smart-beta funds, target-date funds, and even funds-of-funds, or mutual funds that get shares of alternative mutual funds.

Types of mutual funds include but are not limited to 

  1. Equity Funds 

Equity funds are designed to be invested in stocks and it is regarded as the largest form of mutual funds available. 

      2. Fixed Income Funds

Fixed Income funds as its name implies are the types of mutual funds that are set to pay returns at a certain date or set date. They can include bonds of governments, bonds of companies or other several debt instruments. In fixed-income funds, they are undervalued and sold at a higher price for profits.

      3. Index Funds

Index funds are a kind of mutual funds that sees the fund manager buying stocks that align with a major market index in the country.

      4. Money Market Funds

Money market funds seem to be the most popular type of mutual funds especially on social media and among millennials. This type of mutual funds involves the purchase of short term debt instruments which are mostly treasury bills, widely called t-bills. In money market funds, you won’t likely lose your money in many scenarios and you would also not get a huge return on your money but your money is sure to get back to you.

How to invest in mutual funds in Nigeria based on your risk portfolio

In case you are reading this from Nigeria, here is How to invest in mutual funds in Nigeria. Shall we sound a note of warning that this is just for education purposes only and do not imply an endorsement of these mutual funds.

  1. Stanbic IBTC Nigerian Equity Fund

The Nigerian Stanbic IBTC Nigerian Equity Fund is acclaimed to be one of the most expansive open-ended equity bias mutual funds in the country Nigeria. The fund has a net asset value in excess of several billions of Naira under its management. The equity fund reportedly invests a minimum of 60% of its invested assets in equities of blue-chip companies listed on the Nigerian Stock Exchange (NSE) while retaining a maximum of 40% of its total assets in Fixed Income Securities (i.e. money market securities and bonds).

      2. FBN Money Market Fund

The First Bank of Nigeria (FBN) Money Market Fund is an open-ended mutual fund, the fund reportedly invests in a broadly diversified portfolio of short-term, high-quality money market securities such as TBills, Commercial Papers, Bankers Acceptances and Certificate of Deposits issued by rated banks across the sub-Saharan country, Nigeria.

If you are regular saver with short to medium-term financial goals and would like to maximize your income, the  First Bank of Nigeria (FBN) Money Market Fund is the ideal choice for you to take advantage of. Some of the benefits of this fund may include a high level of security for the investor, low risk to the investor, competitive returns and you can start with as little as N5,000 for your own portfolio. The FBN Money Market Fund is managed and provided by FBN Quest Asset Management

      3. ARM Aggressive Growth Fund

The ARM Aggressive Growth primarily invests in equities and thus, it seeks to provide superior long-term protection against inflation to investors with an appetite for high risk investments. The high risk of equities is lowered by also investing the funds in fixed income securities, which provides a fairly predictable income stream for any investor willing to come in. It also provides easy access to your money anytime you want it. This mutual fund is offered by ARM Investments

       4. Cowrywise Mutual Funds

Popular fintech company in Nigeria, Cowrywise also has a mutual funds product which they call the Cowrywise Mutual Funds. Cowrywise is in partnership with top investment houses like Meristem and Afrinvest to help Nigerians from all walks of life to be able to access multiple mutual funds all in one app. The mutual funds are structured to invest in big companies such as Dangote Cement, GTBank, Nestle, Total Nigeria and other high quality fixed income securities in Nigeria. 

It is interesting to point out that anyone would be able to enter these mutual funds easily with as low as NGN100 on Cowrywise.

ALSO READ: CowryWise: How to Travel With Cowrywise

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