An average person can't keep up with all his/her expenses with his/her fixed income. So it is wise to start saving and to do some good investments.
Tips to start investing with little money - 6 Smart Ways
According to a research, an average working person in Nigeria earns a fixed income from his/her salary which doesn't grow much over time but the expenses do grow over time like: cost of buying necessities might go up due to bad economic conditions, plus your expenses might increase overtime once you are married or when you have kids, also you might need money for unexpected expenses in life due to bad lifestyle or health.
Investment is required for growing your wealth and achieving your life growth goals. Doing a right investment or finding a right investment medium can be very confusing for anyone when there is lot of advice out there.
But we have laid down following 6 simple tips for you to start your investment journey. Let's get started:
Start by Saving:
For investing, you need to have some surplus money that you can invest or what you are willing to risk. So the first step before you can invest anything is to start saving by setting aside 20% of your every month's income in Fixed/Tenured Deposits, Savings Accounts or Recurring Deposit accounts.
Almost every major bank provides some sort of savings or Fixed deposit accounts. For example: The GT Bank offers savings account with almost 4% annual interest. You can contact your Bank to know what kind of savings options they provide and how much interest rates they are offering on these options.
You can also use apps like ALAT or Piggybank to put some money aside as savings every month.
Set a Realistic Target
You can't become super rich overnight; it takes a lot of learning, planning, persistence & consolidation. As an investor, you should be wise and not be too ambitious by setting an unrealistic target or goals by simply looking at the successful people or billionaires like: Aliko Dangote or Warren Buffet. They all started small with realistic & achievable goals and consolidated their wealth over time.
Setting unrealistic goals & thinking that you can become rich overnight will make you lose interest on failure in achieving your targets.
For example: set a target for yourself to save & invest at-least N100,000/year with a target to grow your wealth by 30% every year. Setting reachable targets, both in terms of years & the wealth will grow your confidence & also motivate you. And remember to reward yourself by buying yourself a gift when you reach those targets.
Choose an Investment instrument
Other than conventional savings instruments like Fixed Deposit or Savings accounts, there are many other investment instruments available for Nigerians like: Mutual Funds, Gold, Real Estate, Bonds, Stocks, Forex etc. Some are risky while others require a lot of starting investment.
Make a choice based on your starting capital, growth targets, market trends & your investment IQ. You should start by comparing these options and also by reading the investor tips available on sites like NSE’s Investor guide (Nigerian Stock Exchange), Investopedia etc.
When you start investing, you would likely come across so many unknown terms and investing jargon and you would likely become confused & lose patience. But be wise to learn the concepts of the investment properly so that you don't get fooled into a bad investment.
Some investment instruments are riskier than others but may bring higher than expected returns. Depending on whether you are in for the long term or looking to day trade, you should learn accordingly.
For example: Some investment instruments like Forex, Cryptocurrency have grown in popularity but are very high risk investments. These instruments have high trading volume & daily price movements which allows an investor to earn high returns in short time but if the market goes against you then you can also lose big too.
On the other hand, some stocks and commodities may not have that high volume & daily movement in comparison to forex, so the returns could be slower depending on the market movement. It’s better to learn about the risks, starting investment & time required to gain a return before investing in any of these instruments.
If you want to explore any new investment options, it is best to learn about it before getting into it.
There is lot of learning material available on Mutual Funds, Stocks & Commodities for beginners at the Nigerian Stock Exchange's website. For Forex Trading education you can read the beginner's guide at ForexTrading.ng.
Beginners should start by investing in Mutual Funds or Fixed Deposits as they are much safer than other investment instrument, but have slow & lower returns. Once you have some experience, you can start investing some of your capital in other investments as well.
Follow a role model
It’s too easy to lose focus of your investment targets in your pursuit of wealth accumulation. But it becomes easier if you set a realistic target/goal and follow a good role model who is already successful in an investment.
You should religiously read about your role models, their history & any book you can get your hands on to learn about their investment philosophy.
For Stocks, Forex & General Investing education, you should read about examples of Warren Buffet, Jesse Livermore, Benjamin Graham & all the books on them, their investing strategies.
Study the Market Patterns
You should regularly study the Market Patterns on where successful investors are currently investing or where the markets are likely to move in the future or where it is currently going.
Regularly be in touch of the latest investment trends & how market movements are affecting these investments like: if gold prices are going up, which stocks, currencies are getting affected by it. Learn which investment sectors are strong & growing, and which are likely to grow in the future.
For example: If your research indicates that there are major development projects underway in Ikeja, Lagos and which are expected to positively affect the real estate prices to go up, rather than directly investing in real estate, you can also invest in the stocks of the companies that are involved in construction projects in Lagos and in cement manufacturers in the area. So it might be right time to check if the real estate stocks are undervalued right now and invest in them.
Similarly for Nigerian Stocks, Bonds & Forex, you should study the economic conditions of the country like imports & exports, employment data as these factors are going to affect the price movement of the stocks & the currency as well. Depending on your research you can invest accordingly.
In the end, you should remember that not all investments are guaranteed to bring profits. You should follow good money management & only invest the money that you are willing to lose.
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