Naira, Oil, Stocks, All Crashing? Here Is What You Should Be Doing With Your Money

The news everyday these days is full of headlines such as “Oil slump”, “stock market crash”, ‘Naira devaluation”, “election troubles” and more recently “austerity”. It has gotten a lot of people worried, particularly my readers, some of whom have asked what is it they can do with their money. I have given it a long thought and since I am also one of you, I am going to share with you some of the options that I have.

Short-Term Funds – This may sound a bit unusual considering that the money market itself might be crashing but think about it, where else will you want to keep your money? You surely can’t hide it under your mattress or under the pillow. Therefore if you are going to be keeping money in the bank, it sure has to be earning some money for you. You can buy Treasury Bills, Invest in Fixed deposit etc. Whatever it is you are investing in, I suggest you make it short term. Probably not more that three months at a stretch. The reason is, the year is coming to an end and early next year will be the elections. Whilst I do believe the election will be successful and free of major violence, keeping your money invested till February gives you some cash flow flexibility in the new year. It also helps you save in time for any opportunities that may be presented to you in the new year as may likely be the case. The next few tips will explain further

Be Liquid  “cash is king”- Whilst you think of fixing your money in a short term fund, I also suggest keeping a substantial part of it aside for bargain hunting. Prices of properties, stocks and many other good investments typically fall in election years and market downturns as we are currently witnessing. As such, you need to be ready to snap them up when these opportunities present themselves. Periods like this are usually when wealth is transferred and you do not want to miss out on it.

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Properties/Other Assets – I had a friend who in the last election cycle was able to snap up a choice piece of property in Lagos. The gist was that a politician put up his property on a fire sale as he needed cash urgently to fund his elections. A property that will for example cost about N45million was acquired for less than N20million. This is the reason why you should be liquid during times like this. People will put up their houses, cars, and other valuable assets for sale not just for election but due to the economic crunch that we may be facing soon. With the falling oil price and fast depreciation of the naira it is likely that rich people who are in debt may have to sell their assets or even businesses to refinance their loans or payback their loans. A shrewd investor would be nicely placed to seize on this opportunity.

Stocks – Nigerian Stock Exchange got beat up earlier in the month as investors (led by foreign portfolio investors) dumped stocks in droves. The market crashed from about 39,000 points to under 34,000 in a little under a month. As is typically the case, market crashes always involve a lot of over reaction ensuring even stocks with significantly good fundamental are beaten down way below their actual values. Smart investors pounce on opportunities like this to invest in quality companies they could not invest in prior to now because they are now cheaper. Bank and Oil stocks come to mind as they are the ones that have received the most trashing from the market. Whilst the downturn from oil related stocks is quite understandable, banking stocks have been down not because they are not profitable but because they are botched down by regulatory headwinds. These challenges won’t last forever in my opinion as things will surely change for the better or at worst the companies will adjust to the new realities. The challenge however, is being able to pick up the right stocks at the right price.

Forex – People have also asked me if now is the time to buy forex and stash away. My response would be yes and no. No in the sense that buying dollars when it was still around N165 should probably have been the best time to buy it even though it is not still late in the day. For those looking to hedge against future financial commitments in dollars, It is a likely smart move if you decide to buy dollars now rather than wait till it further depreciates. Most analysts believe the CBN will devalue the naira anytime soon making holding on the dollar attractive at the moment. So yes, I would therefore also consider allocating part of money to holding on to some dollars rather than risk incurring more naira losses.

Buying Gold – Gold is one asset I don’t like to own because it doesn’t produce anything, however it has also been an asset that can be used to store away value. If you are the type who does not like to invest in the financial markets or not interested in buying up properties or just hate the risk accompanied with these investments then Gold can be a way out for your money to stay safe and immune from inflation. Once things settle down and the gloomy veil on the economy wears off, you can sell the gold you have in exchange for cash. Gold prices are also known to rise during tough economic times.