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.

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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.

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• 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.

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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.

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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.

(READ MORE:Nigeria’s Macro-economic dashboard for Q3 2020 – Comercio Partners)

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.

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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.

Bottom line

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.

The upsurge in COVID-19 cases around the world has kept global investors flocking the world’s safe-haven currency at an exponential rate, the high demand for the greenback is coming on the high geopolitical uncertainty prevailing in today’s financial market.

Also, it’s important to note at the currency market, the U.S dollar remains king. According to the International Standards Organization, 90% of currency trading done globally involves the U.S. dollar, most crypto assets, virtually the most liquid commodities are priced in the U.S dollar not forgetting about 40% of the world’s debt is dominated in the greenback.

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So Nairametrics felt it paramount to ask a hedge fund manager,  entrepreneurs, and financial experts, about what sectors or assets they would invest in if they had, say, $10,000.

Their responses were revealing and diverse as they were varied—ranging from; buying global equities, local stocks, real estate holdings to investing in digital assets.

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Gavin Smith, veteran trader, and managing partner at Panxora Crypto Hedge Funds.

I would scale into BTC $2,000 now, $2,000 when it comes off to $10,000, then add $2,000 at $9,000 and another $2,000 at the $8,000 level. If BTC then breaks above $13,000 I would buy any of the above orders that had not been filled of the remaining $2,000. I would put $500 into each of these four DeFi protocols: LINK, COMP, KNC, and OMG.”

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DeFi is an exceptionally volatile market and these would need active management, but they represent an opportunity with exceptional upside potential. This is a market our analysts are building a profile in, to advance our DeFi hedge fund later in the year.

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Debo Adejana – Founder, MD/CEO – Realty Point Limited.

I follow the investment wisdom that says, ‘invest in what you know and understand’. I know and understand real estate probably more than any other investment asset class.

So, the decision as per what I will invest in with $10,000 which should be upwards of N4m is simply; Real Estate. I will either do rental income property as part of a properly organized shared-ownership structure or speculate on land depending on how much time I have with the money. The reasons are very basic, real estate investments have been known to survive and surpass any and every challenge.”

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Darlington-Morsi Onyemaka, Co-founder Quba Exchange Forbes Accelerator Cohort ’20.

One of the main pointers to a good investment portfolio is diversified across multiple asset classes which should be according to the investor’s risk appetite. Looking at my long-term investment strategy, real estate fits in perfectly for Ten-thousand dollar investment. My portfolio is already jam-packed with high-risk assets and Real Estate will do a great job at hedging the risk factors without minimizing profitability in any significant way.”

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Francis Obasi Cofounder and CEO of Lead Wallet.

If I have a spare $10,000 right now for investment, first, I’ll invest 55% of the funds into new crypto startups being run by professionals and backed by companies like Coinlist; LID Protocol, and Binance. Second, I’ll invest 20% of the funds into Lead Token as there is still potential for massive growth in the coming months/years. Third, looking at the situation of Nigeria, and not knowing where the current protest (uprising) on #EndSARS is headed, I’ll reserve the rest 25% in USDC/USDT to hold against a potential Naira crash. I’m confident that there is every possibility that the Dollar will become scarce again in the coming weeks/months due to the ongoing protest, thereby returning instant gains for immediate spending on basic needs.”

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Dapo-Thomas Opeoluwa Global Markets analyst and an Energy Trader.

“There are so many ways to invest $10,000. The real question depends on the investor. His risk appetite, his investment horizon, when does he or she want to liquidate? The answers to these now limit the options of investments. So for safe and long-term investments, I always advise investing in index funds, Eurobonds or the Nigeria International Debt fund. This is with the caveat that says ‘low risk equals low returns’. Also, I usually would say, invest in investments that beat inflation so you won’t suffer negative real turns.”

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Victoria Njimanze Investment Analyst at a Nigerian Investment Bank

Well, off my head I’ll go with Bonds, cryptocurrency, Stocks, and then alternatives.  I would definitely make my findings first, but I’ll make a larger portion go into Bonds say 40%, 30% in cryptocurrency, 20% in stocks, and 10% in alternatives like commodity market so as to have a diversified portfolio.”

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Akinsola Esan, a credit risk analyst at Nigeria’s Tier 1 Bank.

Basically, the goal is to earn substantial returns on investments – dividends, capital appreciation, and secondly, beat inflation in naira which is currently about 12.85%. With $10,000, I’ll spread my investments across foreign equities such as purchasing and holding stocks of companies like Apple, Facebook, Google, Fastly, Nio, Amazon, to list but a few, and also buy some top-performing dollar-denominated Mutual funds such as Vantage dollar funds and some other ones recommended by Nairametrics. Lastly, I will look in the area of cryptocurrencies by investing as much in bitcoin, Ethereum, and other recognized Cryptos. There are some dividend-paying stocks listed on the Nigerian stock exchange as well, I will consider holding a number of them.

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Bottom line

Due to the present fickle nature of global financial markets, most financial experts interviewed above are unsurprisingly keen on mostly U.S dollar-dominated financial assets, thus reflecting the greenback’s dominance in demand amid the COVID-19  infection exploding at an alarming rate.

Investing in stocks has always been touch-and-go for Nigerians, both at home and in diaspora. A typical tale of the-more-you-look, the-less-you-see, many Nigerians have experiences – both real and imagined – of how they have lost some money in the stock market.

Amidst all of these, startups offering an opportunity to invest in foreign or local stocks have the problem of trust to deal with, before they can successfully break into the market.

Co-founder and Chief Executive Officer of Chaka, Tosin Osibodu, said this was a major challenge for Chaka when it launched in 2019.

Tosin was a guest on Nairametrics’ Business Half Hour radio programme where he explained that with Chaka, investing in foreign stocks have become a more knowledgeable and transparent process that enables investors to make informed choices.

Chaka, as Tosin describes it, is a gateway that allows Nigerians to easily invest in local and foreign stocks, and also allows those in diaspora to invest in local stocks.

According to Nairametrics’ investment analyst, Olumide Adesina, Chaka “makes it easier for many Nigerians to access world brands like Coca-Cola, Pepsi, Twitter, Facebook, Amazon, General Electric, and provides top-class access to stocks listed.”

With Chaka, global stocks such as Apple, Alibaba, Google, Manchester United, the S&P 500 index and several others listed on NASDAQ, the New York Stock Exchange, and the Nigerian Stock Exchange, and top brands from over 40 countries are only a tap away for investors.

Averting the sour experiences

Sour experiences in investing are usually a result of poor knowledge of the market, and little or no access to market insights. As Tosin explained:

“The market is not bad everywhere at the same time. The secret is knowing the right market to invest at any time, and having the right information.”

Information about market fundamentals, insights and knowledge of the right portfolio at any time will guide an investor towards taking the right buy-hold-or sell decisions, and the Chaka weekly webinars offer this.

Apart from the regular insights, investors can also rest easy knowing that they have the backing of financial regulators such as SEC, NSE, CSCS in Nigeria and SEC, FINRA, SIPC, IRS in the U.S. This is no mean feat for investment start-ups and Tosin admitted that getting the approval of these regulators formed a large part of the initial challenges.

Building automated trading systems to create wealth

During the years spent schooling as a systems engineer in the US, Tosin observed the ease of investing in the stock market, a direct contrast to what was obtainable in Nigeria. Though a systems engineer by training, he was passionate about solving the problem, and reducing access barriers to local and global markets.

Back in Nigeria, he teamed up with his life-long friend and cousin, Bolanle Osibodu to set up Chaka.ng. With a core financial expert and a systems engineer, the company was all set to get rolling.

The goal was simply to reduce barriers to trading stocks across borders, and help Nigerians cash into the emerging mine that was the stock market.

With the Chaka solution, investors can register, get verified, buy and sell stocks the same day. The no-minimum investment rule also makes it open to beginner investors, allowing them to buy as much as they can afford.

For instance, even though the share unit of a company is worth $500, an investor may invest $100 and free up funds to build a well-rounded portfolio. According to Tosin, “if you are above 18 years and interested in investing, we don’t believe that you should be restricted by funds”.

It also has other unique features like the Naira or Dollar conversion on a per-asset-basis so that you can see how a Naira investment would perform in dollar assets or vice-versa. Its low transaction charges and wire transfer fees makes it even more affordable for Nigerian investors, especially since there are no hidden charges.

Collaborations

There are other companies who serve as digital brokers to Nigerian investors. But rather than see them as competitors, Tosin and his colleagues regard these startups as potential collaborators.

“Anyone that does what we do and shares same vision is a potential collaborator,” Tosin said.

One of the ways of collaborating is by providing execution services, white-label services and market automation technologies for corporate and institutional clients, so that these companies integrate Chaka into their operations to provide solutions for clients such as KYC verification, and user-onboarding.

Chaka partners with Citi investment capital in Nigeria and a global broker in the US, through which its offers are regulated by the relevant bodies. The aim of all collaborations is not just for profit but to improve client trust, increase foreign direct investment, and improve the investment income of Nigerians.

“Our focus is to create an amazing customer experience, because the more you can service customers in the way they want to be serviced, the better it is in the long term. This is seen in our lower commission rates, seamless onboarding process, best prices. We are focused on giving the buyer the most transparent offer,” he explained.

With a team of technologists and financial professionals working around the clock, Chaka remains on course to continually improve investment offers, and provide better decision-making tools to customers.