Risk, Returns, Durations are some of the few things that come to mind when we talk about investment.
Today, let’s talk about Risk
The thought of risk tends to make a lot of potential investors anxious. This is because nobody enjoys the idea of losing money. However, without risk, growing wealth can take a while, literally. Nevertheless, if you want to invest and you are very risk-averse, you don’t always need to restrict yourself to regular bank savings, you may want to consider low-risk investments.
A low-risk investment is an investment where the investor’s chances of losing money are very slim. The investor could either break even or incur only a small loss over time.
Here are some low-risk investment opportunities in Nigeria.
FEDERAL GOVERNMENT BONDS
When the Federal Government wants to finance some projects such as road infrastructure, one of the ways they raise funds is through the issuance of bonds. Investing in Federal Government bonds is synonymous with lending the Federal Government of Nigeria money for some time. The Government issues bonds through the Debt Management Office and pays interests once or twice yearly, depending on the nature of the bond.
Investing in Federal Government bonds is risk-free and considered the safest because it is almost impossible that the government would default in meeting its obligation to pay. The minimum amount to invest is N5,000 (for savings bonds) and N50,000,000 (for FGN bonds) while the maturity ranges from 2 years to 20 years.
Issuance of treasury bills is another way by which the government raises money to finance its projects. Treasury bills are just like bonds but the distinguishing factor is that Treasury bills are held for a maximum of one year and you even have the option of collecting your interest upfront! The minimum amount one can invest is N10,000 and the interest rate differs depending on the number of days you want to invest.
A mutual fund is set up by collecting capital from various investors and then investing the capital in diverse asset classes such as stocks, bonds among others. The profit gotten from such investment is then shared among investors either annually or bi-annually depending on the time agreed upon. The beauty of mutual funds is that both return and risk are shared.
Also, the more diverse the mutual fund is, the lower the risk. The investment amount for mutual funds in Nigeria could go as low as N5,000.
Real estate is also one profitable venture you can invest in. We recognize that people might not have the required capital to invest in real estate and that is why an alternative route to investing in real estate is to invest through Real Estate Investment Trusts (REITs).
They are an investment vehicle where investors pool money into a trust and the trust manager invests the money into real estate. Such money pooled together can either be used to build or purchase a house. The dividends are then shared among investors. REITs are traded on the Nigerian Stock Exchange.