Thursday, 22 Oct 2020

The Young Nigerian Woman’s Guide to Mutual Funds

Thanks to the pandemic, the financial situation of young Nigerian women has gone through major changes. A crashing exchange rate, COVID-19 and increases in the cost of everyday items are enough to make us throw our hands up in despair.

It’s now more important than ever for Nigerian women to understand finance and start investing in the future.

For young investors like us who are still new to the game in the struggling Nigerian economy, there are only a few types of investments that are low-risk, affordable, and designed to keep you feeling safe and sound- mutual funds lead this pack. Mutual funds let you leave your money to the experts like the (future) billionaire that you are, while you sip some piña colada by the beach.

First things first, what are Mutual Funds anyway?

A mutual fund is an investment that pools money from many investors (rich people like you and me) and invests the money in securities like bonds, stock, real estate…you name it!

Just like Beyonce’s many talents, mutual funds can be very diverse, one fund can be invested in different securities at the same time. These different securities a fund is invested in at any given time is called a portfolio.

Mutual funds are operated by banks and investment firms that trade in these securities while you fold your arms. Look at God!

Now let’s take a look at the pros of mutual funds:

  • Mutual funds are affordable: Some institutions let you invest in mutual funds with as little as ₦5000. Bye-bye to poverty.
  • They’re easily transferrable: Tired? You can sell your funds at any time. Subject to the rules of your fund/fund managers.
  • They’re low risk: As we said before…you’re too young for hypertension! Mutual funds are invested in low-risk securities so you don’t have to worry about your money disappearing like a witch from a Nollywood movie.
  • Your money is safe: Your money is safe from enemies and fraudsters. No one can come and tell you that your money is missing because mutual funds are registered with the Securities and Exchange Commission of your country. So need to stash away your money under the mattress anymore. 
  • You have somebody to blame if anything happens to your money…which is not even likely: Imagine being the one that is not sleeping at night because you’re watching your investments. That’s low-class behaviour and we are the ELITES. We leave the headaches to investment companies and banks.

And now for some mutual fund cons: 

  • You’ll need to be super-vigilant: You won’t be managing the money on your own so you need to know what securities exactly your money will be invested in. You also want to be on the lookout for sneaky fees passed from the investor to you.
  • The value of your dividends may change: With mutual funds, you may get fewer dividends if the value of the investments goes down.
  • Low returns: You can’t eat your cake and have it! In exchange for safe and steady returns, you get a lower return on investment than if you invest in high-risk securities. 

Tip: Don’t just drop your money and go on a 5-year vacation. Ask questions and monitor your funds + investments. Yes, your fund manager is in charge of where your money goes, but strange things could happen if you’re not watching your money. Watch out for mistakes and strange deductions.

We hope you’re ready to make your first mutual fund investment if you haven’t already. STAY RICH! 

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