The effects of the global financial crisis have reached Nigeria, leading to a credit squeeze from CBN banking reforms this year, causing banks to stop lending and money market rates to fall sharply.
The interest rates on fixed deposits and commercial paper have plummeted from 15-17% a few months ago to 3-5% recently, and there’s no way to predict when they will hit rock bottom. Treasury bills are now yielding less than 1%. Following the stock market crash in some years back, numerous individuals sought safety in the money market and real estate market. Previously, a fixed deposit of N10 million or more would guarantee a monthly cash flow of over N100K, but that’s now a thing of the past.
Investors are now left with the question of where to move their money to. Real estate is full of booby traps, ranging from getting genuine acquisition-free land to multiple land owners and the location of the land with respect to the sea level (for Lagos residents). Turn key investment options seem to run out for folks that prefer to hand over their money and get on with other things.
This brings to the fore, the fact that as an investor, you need to remain in the driver’s seat of your investment. The more financially literate you are, the more options are open to you, and the more control you have over your investment. Buying stocks on recommendation and investing in the money market is a no-brainer.
However, to remain in control of your investment, and to influence your rate of return, you need to step up your game.
Experienced investors set a target rate of return for their investments. Some aim to double their investment within 5 years, which means a minimum return of 14.4%. Others aim to recover their investment in 2 years, equivalent to a 36% return, or 3% monthly compounded over 24 months. These decisions are based on their current position, future aspirations, and desired timeframe.
Building your long-term plan, such as retirement, solely on the expected return from stocks and money market rates can be disheartening and disappointing. Although the money market guarantees returns, the rates fluctuate over time. Consequently, it is a risky move to park your money and hope for the best.
The best way to stay in control is to be an inside investor. Create and expand your own business. Invest in it. If you invest in education, become streetwise, enhance your marketing abilities, and do everything necessary to operate a successful business, your returns will outperform the stock market and money market by a large margin.
Making money in reality involves starting with practically nothing and establishing a multimillion-dollar business. The return on investment when you create your own business from the beginning can be immeasurable. Many billionaires featured on the Forbes list began from scratch.
For those who lack the courage to start their own business, investing in someone else’s dream is a viable alternative. The only downside is that if you’re uncertain about the person’s credibility, you might end up losing your investment. Nevertheless, there are other investment options to explore. The key is to enhance your financial intelligence, which will enable you to navigate the realms of business and finance more effectively. By doing so, you can avoid relying on advisors who may be less financially stable than the individuals they advise, or doctors who cannot heal themselves.