The ultimate goal of embarking on any investment activity is to maximize the highest possible return by taking the least amount of risk. It is an undeniable fact that investing in the stock market anywhere in the world is not for the faint hearted, however only a few will disagree about the potential of generating huge returns from stocks.
This isn’t the 80’s or 90’s. The wind of globalization has blown across country borders and opportunities are no more bound by geographies. The advent of the internet has made it easier for investors to study new markets at a greater distance, access new investment opportunities and with just a smartphone trade stocks online at their fingertips.
There are two major benefits of investing in foreign shores;
- Diversification and possibility of profit from trends and developments outside your country.
- Growth in capital
The basics of investing in any stock market worldwide is the same, however I would outline what I think is to a large extent is needed to invest in a foreign stock market.
What is your goal?
This is a personal question, but this is where it starts. This question will serve as a guide in other things you do along the way e.g. deciding on what type of stocks to buy or what brokerage firm to choose etc.
Is your goal to retire at 40 and travel the world? Whatever the answer is, remember that any investment you choose should serve that investment goal.
Decide on what country to invest in
There are 3 classes of markets – Developed, Emerging market and Frontier markets. There are opportunities in all three classes.
Africa – The stock exchanges in South Africa, Kenya, Zambia, Egypt, Botswana, Rwanda and more, all offer opportunities for foreign retail investors.
Asia – Most countries in Asia will receive foreign investment from any source, and setting up a brokerage account in countries like Singapore, UAE and Hong Kong is not too difficult as there are no restrictions on foreign ownership of stocks listed on their stock exchanges.
India does not allow foreign individuals to invest directly into its stock market. Only high net-worth individuals (with a net-worth of at least $50m) can be registered as sub-accounts of foreign institutional investors.
Saudi Arabia is closed to foreign retail investors, as only citizens of members of the Gulf Cooperation Council can invest in the stock exchange.
China has 2 types of shares, with different rules – Class A and B shares. Foreign retail investors can only trade on Class B shares.
Western Europe and North America – There are no major barriers for retail investors to invest in the majority of stock markets in Europe and North America. You also have the advantage of multimarket brokerage accounts which covers the majority of both regions. These markets have thousands of stocks and are already developed.
In selecting a country, you will need to focus on economic and political stability, the key drivers of that particular economy, transaction costs, counterparty risks, and regulatory risk.
Select a Broker
Once you have decided which country you want to invest in, the next step is to choose a suitable broker for you.
The internet is a goldmine, a simple step will be to visit the website of the stock exchange of the country you plan to invest in and search for the list of active stockbrokers in that country.
Once you select a list of stockbrokers that interest you, visit their websites for more information to see if services offered will meet your needs. You will need to go as far as calling or sending an email to get a proper understanding.
Stockbrokers may have their own charges, so it is up to you to search for a few and find out before making a decision to place your money.
Documents required for opening a Brokerage Account
The documents that may be required for opening an account before you start trading in stocks may differ from country, however, a list of documents you will definitely need to provide is listed below;
- Account Opening Form
You will need to complete an account opening form, otherwise known as “Know Your Client (KYC). Filling this form will require you to provide certain details not limited to your full name, passport number, ID number, house address, banking details, investment strategy etc.
- Certified Copy of your passport
A certified copy of your passport and passport photograph must be mailed to your stockbroker.
- A recent Bank statement
This will be used to verify that you are indeed the owner of the account that will be used to send and receive funds. The bank statement must show your account number & IBAN or SWIFT code. Don’t worry about not having much in the account.Some brokers will require that the above documents must be stamped by your bank.
After all is done and your account is opened, you will need to transfer funds to your broker’s bank account. We listed several ways to transfer money abroad from Nigeria
You can submit a trade order by signing a trade mandate form or sending an email.
Finding Good Companies
Discovering quality companies that will provide high returns is tough, but a good starting point for a smart investor will be to visit the website of the Stock Exchange. The websites usually have a list of all the companies listed, including weekly and monthly reports of the performances of these companies and the market in general.
You can find the list of companies and pay a visit to their respective websites. The websites of these companies will have more information about results over the years which is usually included in the Investors Relations section.
You don’t have to be a genius at analyzing financial statements or interpreting financial jargons. Reading research reports and being up-to-date on financial news will keep you abreast on happenings.For an individual just starting out it will be better to seek the financial counsel of your broker who understands the market better than you do.
Aside from investing in individual stocks, investors have other options of asset classes to invest in, some of which include;
Exchange Traded Funds (ETFs)
An ETF combines the features of an index fund and a share. ETFs allow investors to take exposures in the underlying assets of an ETF in a cost-effective manner without having direct exposures to the underlying assets.
Depository Receipts (DRs)
A depository receipt is a negotiable financial instrument issued by a bank to represent a foreign company’s publicly traded securities. The depository receipt may trades on a local stock exchange, such as the NEW York Stock Exchange in the U.S., but represents an interest in a company that is headquartered outside the United States.
Two types of DRs are the American Depository Receipt (ADR) and Global Depository Receipt (GDR).
Retail franchise investment next gold mine for Nigerian investors- CIG
Retail franchise investment curbs unemployment and create buffer for people looking for side hustle
The Choice International Group (CIG) has tasked both unemployed and employed Nigerians to embrace retail franchise investment, as the initiative would curb unemployment in the nation and create buffer for people looking for side hustle.
In line with a recent FBDS Study, there are over 450,000 Nigerian career professionals with minimum investible funds of N1 million, looking out for investment opportunities.
In the majority, these funds are looking for franchise type opportunities for ease of venturing and minimal failure risk.
As far as CIG chairperson, Diana Chen, is concerned, such investor should look no further but consider the group’s retail franchise investment opportunity, which offers Nigerian community mouth-watering offer of owning Gree & Lontor retail stores.
According to him, Gree is the world’s residential air-conditioner manufacturer, while Lontor provides high-quality, energy-saving and convenient rechargeable home appliances and lighting products for global consumers.
He said, “Both brands have been built by the CIG into a world-class electronic retail chain in Nigeria opening no less than 20 brand shops in Lagos and Oyo over the last 18 months.
“The sales performance of its existing stores in the country makes Gree & Lontor one of the most profitable businesses in Nigeria with yields of an average return on investment of 50% and above per annum.
“CIG is offering investors the opportunity to own any of six regional logistics centres, or any number of Gree & Lontor brand shops in viable locations across Nigeria.
“It is the decision of the company to open up these opportunities to the investing public through a Franchise Retail partnership.”
He added that the company has mapped out two investment models it says are simple, transparent, and hassle-free.
“The first model involves only six regional logistics centres located across the geopolitical zones in Nigeria.
“Whoever invests in this will require a capital outlay of $1 million, and become a mega distributor partner of the Gree & Lontor brand, and service a network of brand shops.
“The second investment model involves the Gree & Lontor brand shops – retail franchise stores that require an initial capital outlay of N20 million.
“The investor will secure a store size of 120-150sqm at any choice location, shopping mall, plazas, high streets and even residential neighbourhoods.”
What they are saying
Nigeria is a growth market for franchising and franchise development services.
Gbenga Ajayi, an Entrepreneurship analyst, said, “The retail industry comes second to the food industry among sectors with best franchising opportunities.
“As with other emerging markets, one of the challenges of franchising in Nigeria remains the strengthening of intellectual-property regimes so that franchise companies can transmit knowledge and franchise system concepts with the confidence that such know-how will be protected.
Where to invest N500,000 right now
Nairametrics interviewed financial experts on what assets they would invest in if they had N500, 000
Since a full economic recovery this year is off the table, Nairametrics interviewed some investment experts, entrepreneurs, and corporate heads, on the assets they would invest N500,000 in. The responses varied from buying gold to investing in mutual funds or starting a business.
The world economy is projected to fall by 4.4% in 2020, an upward guide from an earlier predicted rate of -4.9% made in June. The IMF projected that social distancing due to the COVID-19 pandemic will linger till 2021, but the transmission of the virus will plunge globally by the end of 2022.
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Temitope Busari, CFA
With fixed income yields at the current levels, my N500k in today’s market will go into a dividend-paying stock or alternative investments.
- Depending on whether or not I can afford to risk some capital and barring timing constraints, I would buy a stock that offers periodic cashflow in form of dividends.
- For alternative investments, I would explore high-yielding fixed deposits in the on-lending space.
Michael Nwakalor, Macroeconomist at CardinalStone Research
- The yields in the fixed income markets are currently on the low and producing negative real returns, the equities market provides a viable alternative to earn a total return above inflation.
- I like stocks in the banking sector, as a number of them remain undervalued by fundamental metrics. Several names are on the course to post near double-digit dividend returns by the year-end. A portfolio that includes the following counters – GUARANTY, STANBIC, ETI, FBNH, and ZENITH, should provide adequate exposure to the sector as well.
Adaobi Okonkwo, Currency Trader of a leading Tier 1 Bank
- With a few things to invest in, the most reliable investment that comes to mind is a mutual fund. The fixed income and money markets are currently experiencing a downturn; hence, investing in them could reduce my income spread.
- However, with a mutual fund, my portfolio of investment in the capital markets is determined by the fund managers with a decent return on investments certainly above the risk-free rate. Gold is a commodity that would yield a good ROI within a specified time frame if I wanted to invest by myself.
Silas OZOYA, President/CEO, SUBA Capital
Though quite a small capital, it might not do much if you want to play the long-term investment game. However, it can set the ball rolling.
- I would invest it in a high yield investment platform that pays at least 5% returns monthly to cover running costs.
- Put the money in a fixed deposit and leverage it as collateral to take a debt fund, with a 6 – 12 months moratorium from a commercial bank for a possible expansion of a profitable business. This way, you gain on the debt and still have your N500,000 intact.
Ugonna Thelma Ohiri-Anyanwu, CFA
With a gift of N500,000, my risk appetite and drive for higher returns,
- I would invest 50% of the funds (N250,000) on dollar and Eurobonds. This is mainly because of my future needs for FX and also as the need to hedge my currency risk.
- I would invest 25% of the balance (N125,000) in Ethereum, which would give me a steady cash flow with medium risk.
- The balance of N125,000 would be invested in Value company shares with low P/E and also stable dividend payments.
The overall investment portfolio allows for diversification, stable cash flow in both local and FX currency, and currency hedge. These would provide a solid mix between ownership of materially underpriced assets and high dividend-yielding assets.
Amid the rising COVID-19 caseloads prevailing globally, the financial experts interviewed above showed significant diversity on the assets they would invest in, coupled with their different appetite for taking risk reflected on their preferred choices made amid a blurry global economy era.
Nairametrics | Company Earnings
Access our Live Feed portal for the latest company earnings as they drop.
- Seplat falls into a loss in FY 2020
- 2020 FY Results: Cornerstone Insurance Plc reports a 61.1% decline in profit
- Ellah Lakes increases operating expenses by 33.36% in HY 2020
- 2020 FY Results: Nigerian Breweries reports a 54.3% decline in profits in 2020
- Abbey Mortgage Bank projects N51.08 million profit in Q2 2020.