What lies ahead for Mutual Funds in Nigeria

Proshare

Monday, January 12, 2015 5:14 PM / Siaram

 

Mutual funds have long been regarded as one of the top options for investments across the world, and the mutual funds in Nigeria have also been growing manifold since inception - for example the assets managed by Stanbic IBTC Management has gone up by around 300% over the past 10 years. The overall industry has grown 23.6% in 2014 to N143 Bn as per SEC estimates.



However, the Nigerian mutual fund penetration is very low as compared to other countries, and it is estimated that only $1 Bn out of the total global mutual fund investments of $30Tn is from Nigeria. The low penetration of mutual funds in the country is the key cause to this.



Mutual funds remain a safe way to grow money, with a variety of options to suit every investor, ranging from equity to debt options and in Nigeria’s case ethical options are available as well. Investing in mutual funds is one of the best options  as it reduces the burden of stocks selection and daily monitoring.
 


Investing at regular intervals will be the most beneficial and ideally, although many funds have had a run up in the past year, and the current year seems to have a lot of volatility, we recommend that you still continue your monthly investments into mutual funds - just ensure that you select a fund with a good track record, good fund manager, and one that suits your risk profile.

 

It is important to keep in mind that stock markets are highly correlated with elections, and given that the current elections are going to be very close, it is hard to determine which way the election will swing - this indicates that the volatility in the markets may gain momentum in the next few months due to high tendency of post election crisis. If you buy mutual funds each month, you might get them at cheaper prices before the half year, and you stand to reap the benefits over the long period.

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