Millennials have been advised to exercise caution when it comes to investing in schemes that are not regulated but promise huge returns.Mr. Ebovi Wali, an independent investment consultant made this point as he provided insights on the dynamics of investments in the Nigerian capital market as it concerns millennials and Gen-Zers.
Because millennials and Gen-Zers who constitute the majority of Nigeria's population (21-40), it was important for them to make the right investment decisions.
He noted that Nigeria like other countries have experienced the advent of various Ponzi schemes that posed risks to the savings and investments of investors especially the millennials.
As an advocate for increased investor education and financial literacy in the country, Wali described investing as strategic planning and utilization of one's current pool of financial resources, to generate future cash flows and wealth over the long term.
Speaking further he said the current double-digit inflation rate in Nigeria, is hampering prospects for long term wealth creation particularly for young people, including the pressures around the exchange rate.
He believed it was important to ensure that money was growing ahead of inflation every year.
The expert stated the following reasons why young people should take investing seriously;
He highlighted the various non-traditional asset classes in the market which cover the following;
1. Angel investing: Angel investing guarantees access to long term wealth.
2. Starting a business: which will give access to stronger ownership status in the business, dividends, capital growth.
3. Earnings potential: Young persons need to invest in the ability to earn more through taking professional courses that are essential in one's field, learning a new language that will in turn give access to faster and stable wealth/ higher salary potential.
Looking at traditional asset classes he identified the stock market, foreign and local equities/equity fund, while he noted that the secondary market is for trading in the shares of companies.
He noted that in the last 10 years, the naira has lost real value, and has been on the trajectory of losing more value. He emphasized the need for investing in dollar-denominated assets, through buying foreign stocks that would give an individual access to dollar cash flows and capital growth opportunities.
Millennials according to him have access to investment opportunities both in the local and foreign space.
Other asset classes and investment opportunities that he pointed to include, Fixed Income and Mutual Funds. He observed that the fixed income asset class guaranteed capital to a large extent with almost zero risks or losses. Either government fixed-income instrument or corporate. In engaging in a fixed income instrument an individual, he noted that individuals were lending to the government or companies.
He also advocated for Crowdfunding which could provide the opportunity for pulling together resources and investments in the real sector of the economy.
Wali also mentioned the Local instruments (money market funds), Agric commodities and real estate co-investing( long term stable investments that can give outsized returns).
He urged millennials to deepen their investment knowledge which can equip them to be financially independent, as they increase their desire for knowledge.
The investment adviser noted that several platforms allow individuals to learn about diverse asset classes. He noted that it was also important to conduct independent investment research in assets.
He also tasked the millennials on investing in what they know, and the need to have an understanding of the elements, opportunities and the macro factors.
Wali was of the view that technology has helped in the process of the democratization of information in the market.
One area he identified as a challenge for millennials is the macro environment in Nigeria.
He reiterated the need for millennials to desist from chasing quick returns, so they do not fall prey to Ponzi schemes and should rather engage investment consultants to help guide them in their journey to financial freedom.
Wali stated that having a group of individuals that are knowledgeable about investments is also very critical. He also urged millennials to join trade forums where investment ideas are shared.
"People invest in the capital market because of the regulatory framework such that individual investment is protected as the capital market operators are held to account for what they are doing".