Diversifying your investment options

When one understands the core concepts of investing and follows through with thorough analysis of available investment options, an investor can maximize returns while minimizing risk exposure. There are many investment options available but we will focus on the following:

Cash investments -These are short-term investments whereby cash is deposited and returns are received on such within the short period agreed usually a year or less. These include savings bank accounts, certificates of deposits (“CDs”) and treasury bills. This investment option pays low rate of interest and can be risky in times of high inflation. In Nigeria, there are a lot of cash investment instruments available such as Bankers Acceptances (“BA”), Promissory notes and Commercial Papers.

Debt securities -These are interest-paying bonds, notes, bills, or money market instruments that are issued by governments or corporations.

Stocks or equities - This is an instrument that signifies ownership position or represents a claim on one’s proportionate share in the corporation’s assets and profits.

Stock or equity investments are riskier than bonds or debt security investments. Before investing in stocks, one needs to do thorough research on the company of interest.

Mutual funds – Mutual funds are professionally managed collective investment schemes that pools money from many investors and invest typically in investment securities such as stocks, bonds, short-term money market instruments, other mutual funds, other securities, and/or commodities such as precious metals and crude oil.

Real Estate - This is usually residential real estate that one purchases with the intent of earning from it. Hence real estate investment is real estate purchased with the intent of renting it, selling at a higher price, or using for almost any purpose other than using it as a residence.