Investments made through passive investing are those made by investors who don’t manage their investments on a daily basis.
Making your money effectively work for you allows you to concentrate on other activities that contribute to your source of funding. This category includes the majority of middle- and upper-class Nigerians.
However, the past three years have been highly challenging for rising economies in Africa, particularly in sub-Saharan African nations like Nigeria and Ghana. The Covid-19 outbreak sparked an exodus of foreign investors from Nigeria and other emerging economies, resulting in a currency crisis that caused the exchange rate between the naira and dollar to collapse by more than 50% since early 2020.
Due to people’s fear of losing their money, passive investing has become extremely unattractive and appears to be less profitable as a result. Despite these worries, there are passive investing opportunities in a situation when there is rising inflation, a declining currency, and other macroeconomic difficulties.
Risk-taking investors frequently take advantage of depressed economic conditions to make investment decisions that produce enormous returns. Others who are risk-averse choose investments that are less risky yet offer returns that are above average and outperform inflation over the long run.
For those who are eager to have their money work for them, we have selected some of the most alluring passive investment possibilities.
Eurobonds – These are government-issued bonds that have a dollar value of one and were issued by governments.
1- Depending on the security’s characteristics, the bonds are subject to a coupon or interest rate that is paid once or twice a year.
2- In times of currency swings and devaluation, Eurobonds make a great hedge.
3- Additionally, depending on when they were issued, interest rates on Eurobonds have a yield of between 6 and 8%.
4- Since bond prices have dropped, the identical Eurobonds that originally sold for around 8% have yields of around 13–14%.
Government Securities – Even though things have changed recently, this probably wouldn’t have been chosen six months ago.
1- Treasury bills and FGN Savings bonds have increased in price ever since the central bank began its program of hiking interest rates (which are currently 16.5%).
2- The government recently released 2-year and 3-year FGN Savings Bonds with interest rates of 12.25 percent and 13.25 percent, respectively.
3- The current yield on one-year Treasury bills is likewise 14.8%, which is the highest in approximately two years.
4- Even if it is still behind inflation, it is among the safest investments available, particularly if you are a passive investor with a very low risk tolerance.
Stock Market – There has never been a better time than the present to heed the proverbial wisdom of the renowned Warren Buffet, who once said, “Be frightened when everyone is greedy, and greedy when everyone is fearful.”
1- Investing in the stock market at a time of high valuations is a common error that investors make. Even though there is still money to be gained in some equities, particularly if you time it well, the majority lose money.
2- The best moment to invest in stocks is when they are undervalued, especially for businesses with strong fundamentals.
3- The plan is to buy them when their share prices are still relatively low and sell them later when things are much better economically and more people are wanting to buy.
4- Investing in stocks like this is frequently best done in December and early January.
5- For wise stock selections, returns during market downturns and boom times can range between 25% and 50%.
Real Estate (local): In terms of rising inflation, this is a no-brainer, yet it has a certain ring to it. Real estate agreements may be a money-making machine if the appropriate developer is chosen and the right area is targeted.
1- Locations along the Lekki, Ikate, and Agungi axis are highly sought-after, particularly for young and upwardly mobile professionals searching for apartments, according to some developers who spoke with Nairametrics.
2- You can buy to sell or buy to rent from these sites and make a fixed income yearly.
3- Depending on the location, a two-bedroom home that costs roughly N60 million can bring in N1.5–N3 million in yearly rent for the owner.
4- Short-let is another way to make money with real estate investments. You can host visitors in your flat for a day, two days, a week, or even a month rather than renting it out. Owners of short-term rentals profit by their apartment by an average of N100k every day.
5- Returns on real estate transactions range from 30% to 60% in capital gains on the sale of the asset and between 8 and 12% annually for rental yields.
Real Estate (foreign): The assets that generate foreign currency income are among the few investments that are as delicious, and real estate is the only investment that does so abundantly.
1- Smart Nigerians have begun to see this potential and profit from the expanding international real estate market.
2- It is normally an extremely expensive endeavor to own property outside of Nigeria if you reside there. Some shrewd men, however, partner with trustworthy Nigerians who reside abroad in order to co-own houses.
3- The main benefit in this situation is a mortgage, which you cannot obtain without an international credit history. However, you can break into the real estate market in nations like the US and Canada by teaming up with a person who resides overseas but has a strong reputation.
4- However, if you have money, you don’t need to hunt for a companion. Just be sure to locate the best realtors and attorneys who can assist you in completing this.
5- Returns on real estate transactions range from 20% to 30% for capital gains on the sale of the asset and from 4% to 8% annually for rental yields.
Cryptocurrencies – A few years ago, not many people were familiar with Bitcoins when we suggested buying them.
1- Now, even if they are infamous, cryptocurrencies are well-known financial choices.
2- The most recent cryptocurrency crash hasn’t done anything to help, particularly for the exchanges like FTX and altcoins that have shut down.
3- The price of bitcoin has decreased by roughly 70% from its year-high last year, and it is still expected to decrease considerably more.
4- There are, however, excellent cryptos with fantastic use cases that will remain valuable once this cycle is through.
5- Cryptocurrency investments can yield returns of up to 1000% between bubble and bust cycles.
Startups – Investors are now putting all of their money into companies that truly earn cash and pay dividends because the winds of chronically raising money startups have now died down.
1- Prior to now, entrepreneurs’ exclusive focus was on raising capital at exorbitant valuations in exchange for extraordinarily high growth in client acquisition.
2- The focus now is on businesses producing money and being able to provide investors with some kind of return, though, given interest rates are rising globally.
3- This investment may be made via preferred shares, debt, or stock.
4- This and other excellent small businesses with the potential to give their owners fantastic returns are found in the gray market.
5- Investors may receive returns on their investments of this type of up to 30% annually.
Fixed Income – This is the old-fashioned practice of depositing money with financial institutions like banks and companies in return for interest payments.
1- Due to the current high interest rates, investors with access to liquid cash can anticipate receiving substantial interest rates for their investments.
2- Simply ask your bank for investments in fixed deposits in exchange for interest.
3- The majority of commercial banks will offer you more interest and vice versa depending on the size of your fixed deposit.
4- Microfinance institutions that engage in lending give their depositors much higher interest rates.
5- Depending on how much money you have, commercial banks charge interest rates ranging from 8% to 16%.
6- If you have more than N100 million to deposit with a bank for a year, they may offer fixed deposits at a rate of up to 16%.
7- Microfinance banks, on the other hand, can pay between 1.5% to 2% per month on fixed deposits if you are ready to deposit your money with them for at least 6 months.
P2P Lending – Lending, also referred to as “Peer 2 Peer,” is the practice of using applications to distribute funds to users who have registered for the apps in exchange for interest.
1- This is a risky enterprise and is not suitable for those who are not adventurous.
2- Through platforms that establish a market for these kinds of transactions, you may essentially lend individuals your assets (stocks, cryptocurrencies, etc.) or cash.
3- We won’t list names because it’s important to highlight that most are not regulated in Nigeria.
4- one more helpful P2P lending, sometimes known as “Proof of Funds” lending, is essentially the loan of money to Nigerians who want to obtain a visa for international travel in part.
5- These kinds of transactions may have interest rates of up to 4% per month, but as already said, they also carry a substantial level of risk.