THE ₦50 MILLION INVESTMENT CHALLENGE: THE CONCLUDING SUBMISSIONS

SOFT FINANCE

In this edition, we publish the concluding submissions on the N50m investment challenge we had thrown to members of the Thisday Life Lessons forum

ADEWALE OLUTOBI: I WILL DIVERSIFY
Investing N50 million to generate an attractive return on investment within 12 months is a significant challenge, as it involves careful consideration of risk, market conditions, and investment goals. Here are the comprehensive steps involved:

1. INVESTMENT CHOICE:

I would choose a diversified investment strategy that spreads the risk across multiple asset classes. Here’s how I would allocate the funds:

Equities (40%): Invest N20 million in a diversified portfolio of Nigerian and international stocks. This would provide the potential for high returns but also carries higher volatility.

Real Estate (25%): Allocate N12.5 million to real estate investments, focusing on properties in growing urban areas or commercial properties with stable rental income.

Fixed Income (25%): Invest N12.5 million in fixed-income instruments like government bonds, corporate bonds, and fixed deposits. This provides stability and income.

Alternative Investments (10%): Allocate N5 million to alternative investments like mutual funds, private equity, or venture capital. These offer the potential for high returns but come with higher risk.

2. STEP-BY-STEP STRATEGY:

a. Research and Analysis:
Conduct thorough research on potential stocks, real estate opportunities, and fixed-income options. Diversify within each asset class to mitigate risk.

b. Portfolio Construction:
Build a well-diversified stock portfolio with companies from various sectors and regions. In real estate, select properties with strong growth potential or stable rental income. In fixed income, choose a mix of short-term and long-term instruments for balance.

c. Risk Management:
Regularly monitor the portfolio’s performance and make adjustments as needed. Use stop-loss orders for stocks to limit potential losses. Ensure proper due diligence in real estate investments to mitigate risks.

d. Professional Assistance:
Consult with financial advisors, real estate experts, and investment professionals for guidance.

3. EXPECTED RETURN:

The return on this investment would depend on various factors, including market conditions, economic trends, and the success of individual investments. However, here’s a rough estimate:

Equities: Historically, equities have the potential to generate annual returns of 8-12% on average. So, a 40% allocation could yield around 10% or N2 million.

Real Estate: Real estate returns can vary widely, but a 25% allocation might yield around 5-8% annually, or N1.25 million to N2 million.

Fixed Income: Fixed income investments could provide a more conservative 6-8% return, or N750,000 to N1 million on the 25% allocation.

Alternative Investments: Depending on the specific investments chosen, a 10% allocation might offer returns in the range of 10-15%, or N500,000 to N750,000.

In total, the expected return could range from N4.5 million to N6.75 million, but it’s important to note that these figures are estimates, and actual returns may vary significantly due to market fluctuations and unforeseen events.

Remember that investing always carries risks, and it’s essential to have a well-thought-out strategy, diversification, and a long-term perspective when managing a substantial sum of money like N50 million. Consultation with financial experts is crucial for making informed decisions.

MAC ATOM: I WOULD SPREAD THE RISKS

RISK MITIGATION AND DIVERSIFICATION:

Diversification across asset classes and within each class helps spread risk. It’s important not to put all the money into one investment.

Consider using mutual funds or exchange-traded funds (ETFs) to achieve instant diversification within equities or bonds. Maintain an emergency fund in a low-risk, highly liquid account to cover unexpected expenses or market downturns.

TAX PLANNING:

Be mindful of tax implications on my investments. In Nigeria, different investments are subject to varying tax rates. Consult a tax advisor to optimise your tax strategy and minimise tax liabilities.

MONITORING AND REBALANCING:

Regularly review my portfolio’s performance and rebalance it if necessary to maintain the desired asset allocation. Reinvestment of dividends, interest, or rental income can boost overall returns.

LONG-TERM PERSPECTIVE:

While the investment horizon is 12 months, it’s essential to have a long-term perspective in mind. Market fluctuations can impact on short-term results. Avoid making impulsive decisions based on short-term market movements.

EXIT STRATEGY:

I would define clear exit criteria for each investment. Decide when to take profits or cut losses. I would have a plan for the end of the 12 months, whether it’s to reinvest, withdraw, or adjust the portfolio.

RISK TOLERANCE AND LIQUIDITY:

I would assess my risk tolerance carefully and consider my financial goals and how much risk I can comfortably take. Ensure I have access to some liquid assets to cover immediate financial needs or emergencies.

CONTINGENCY PLANNING:

I would plan for unforeseen circumstances. What if the market experiences a significant downturn? I would consider having a portion of my portfolio in highly liquid assets that can be easily accessed in emergencies.

STAY INFORMED:

I would stay updated on economic news, geopolitical events, and market trends that can impact my investments. Being informed helps you make informed decisions and adjust your strategy as needed.

PROFESSIONAL GUIDANCE:

I would consult with financial advisors, investment experts, and legal professionals to ensure my investments are well-structured and compliant with regulations.

It’s important to note that while the suggested asset allocation and estimated returns provide a starting point, the actual outcome may differ significantly due to market volatility and unforeseen events. Moreover, past performance is not indicative of future results. Hence, careful planning, diversification, and ongoing monitoring are key to success when investing a substantial sum like N50 million within a 12-month horizon.

TITUS ABE: FOREX ALL THE WAY

If I were given ₦50 million to invest in any instrument of my choice to generate attractive returns within the next 12 months; I’d go about it thus:

1. Where would you invest the money?

I will invest 100% in the FOREX MARKET.

2. What is the step-by-step strategy you would employ?

2.1. Select not more than three instruments in the market to trade.
2.2. Set a target of 0.5% returns on every trade per day. (₦250,000.00) and my RISK TO REWARD will be 1:3 per trade.

2.3. Stick to a RISK TO REWARD ratio of 1:3 per trade.

2.4. Stop loss MUST be on every trade.

2.5. Once I meet my target for the day, I close all my trades and wait to continue trading the following day.
2.6. Out of five days of the week, I may leave one day free of trading. Effectively, active trading will be for ONLY four days in the week. This translates to an income of ₦1 million weekly.

2.7. At the end of the week, I’d move ALL my profit from the trading account to my bank and ensure that I’m left with a balance of the initial trading capital of ₦50 million to start trading at the beginning of every trading week all through the 12 months.

2.8. With four weeks in a month, the income becomes ₦4 million and the capital is still intact.

2.9. Within 12 months of not deviating from the strategy and being consistently disciplined, the total income equals ₦48 million.

3. How much return do you think you can generate?

Within the stipulated 12-month period, I’d have generated a minimum total income of ₦48 million. (That is about 100% return on investment).

CHUKWUDI OKAA: I SETTLE WITH CREDIBLE FUND MANAGERS

There are few investment opportunities in Nigeria. We also have the problem of most of the investing fund managers not being ready or willing to attend to individuals who are not in a certain net-worth bracket. It is even worse for you if you are not in business or live in Abuja or Lagos.

With N50 million, my strategy will be to identify the best fund managers in the country, the investment options they offer and the returns. I will also identify fund managers with good custodial fund management. Finally, I will have to identify and speak with, the staff of the fund managers and convince myself that they are ready and willing not only to accept my funds but are willing to help me with investment options that are available in real-time. This is important because my experience with a few of the fund managers showed a lack of seriousness of their staff who will never attend to your inquiry on time, will not provide real-time information on the market and even when I applied to terminate and receive my investment it became a big problem. I was asked to identify myself. I sent my National Identification Number (NIN). It was rejected. I sent my Nigerian passport and voter’s card. It’s over a week. I have not received my money.

Having gotten all the information I needed and identified the fund manager that meets my needs, I will seek information from them on the investment opportunities in the market and the returns on the investment.

Having been properly guided by the experts in the field, I will invest the funds based on their advice, spreading the funds to two or three fund managers. I will only invest in funds that have a return of 11 per cent minimum. I will also invest a smaller portion of the fund in FGN Bonds that yield 12 per cent with quarterly interest for three years.

CAVEAT: Please note that none of the investment opinions expressed in the three propositions above represent those of THISDAY NEWSPAPERS and THISDAY LIFE LESSONS. Readers interested in experimenting with any of them are advised to consult their investment experts.

FMAN TAKES INVESTMENT EDUCATION TO SCHOOLS. Officials of the Funds Managers Association of Nigeria (FMAN) were at the King’s College, Lagos last week to educate the senior classes on the benefits of savings and investments. Here, with some of the students, is the President of FMAN, Mr. Aigbovbioise Aig-Imoukhuede, flanked by his colleagues, Mrs. Fadekemi Obasanya, Head, Technical and Enlightenment on the left, and Mrs Laura Fisayo-Kolawole, Executive Secretary, on the right.