How much do I need to start with to invest and what can I invest in?
Can you share investment ideas we can invest in?
What do I invest in if I do not have so much money?
These are some of the questions I received in my inbox this week.
My response to the question ‘What to invest in if you do not have a lot of money?‘ was simple. Try mutual funds
Mutual funds are a great option for anyone who does not have a lot of money to start investing.
I wrote a blog post last year where I shared, in simple terms what a mutual fund is and it is a good option if you really can’t be bothered with picking individual stocks or checking treasury bill rates yourself. Mutual funds are great for a beginner investor to get started investing with no hassles.
If you already have a portfolio of assets which does not consist of mutual funds, you should take advantage of the mutual fund. It is a hassle-free way to earn interest. My only advice would be to select your fund option carefully.
There are mutual funds that invest in the money market and stock market. Some invest in both markets while others invest only in ethical funds. Most financial institutions offer a variety of fund options.
My review on the 2 mutual funds I have invested in will be based on three (3) core factors; The subscription sign-up process, quality of reporting and returns. Before you proceed, kindly note that this review is based strictly on my experience.
The Sign-Up Process
One of the key things I look out for when investing is convenience. That’s because I am a millennial and I have a lot of things to do. (#just kidding).
The actual truth is I don’t want to spend my time filling forms or visiting an office when I could be using that time for more productive activities.
Stanbic IBTC operates the largest open-ended mutual funds in Nigeria. Most of the funds they manage are worth millions of dollars in terms of net asset value. When I did my research on which mutual fund to invest in, It made sense to me to get in on the action with Stanbic IBTC.
On that basis, I decided to invest in one of the 6 mutual funds outlined on the corporate website. I got all the information I needed about the mutual fund, however, when I had to fill out an 8 page subscription form to subscribe to the fund, I didn’t exactly enjoy it. That’s because I do not enjoy filling out forms.
The second step, after filling the subscription form, is to send the completed form and an issued cheque to any branch of Stanbic IBTC plc.
To be honest, I did a bank transfer, so I guess it is possible to do a bank transfer, but if I had to rely on the sign up process for new subscribers outlined on the corporate website, I think it would probably have taken me a while to sign up.
My second Mutual Fund experiment was with AXA Mansard plc. AXA Mansard plc is a non-banking institution. They offer a plethora of products and services which include insurance products, mutual funds and pension administration. Based on a referral, I decided to check out the mutual fund options they offer.
They keep it simple. I’m not sure if it’s because they are not a full banking institution. Mansard plc. offers only 2 mutual fund options; Money market and Equity Income. I started the process to invest in one of the funds and I was blown away by how simple the process was, I literally started and completed the entire process of signing up and transferring money to the fund in 15-20 minutes. It was really convenient.
Both institutions are quite strong with reporting. They both have website portals where subscribers can log in to view the status of their investment easily online.
So, this aspect wont be a problem for you, if you’re a mother hawk who loves to see how your money is put to work on a regular basis.
As a direct subscriber to 2 funds managed by the companies mentioned above, I can view the historical performance of both funds and it was interesting to see that there was no significant difference in the historical returns on the funds.
However, I wish I could get access to the historical performance of other funds in the market to do a proper comparison. For some reason, it is difficult to analyse the performance of most mutual funds in Nigeria if you are not a direct subscriber to the fund.
On there being no significant difference in returns for both funds, I think it’s probably because I invested in the money market mutual funds for both companies. Both funds reported an average returns of 15% from trading in the money market.
Before you think that rate is too low, you should know that Nigeria has one of best returns on investment in the world. Most developed countries provide an average of 2-4% returns or less when you invest in the money market. Earning 15% interest is also better than leaving your money in a savings account
Can you earn higher interest on another investment option? Yes, you can earn higher returns on other investment options ,but be prepared to accommodate the risk that comes with those options.
Mutual funds offer a simple opportunity to earn compound interest so it doesn’t hurt to include them in your investment portfolio. If you ask me, I would say lock it in for 10-20 years (P.S This applies if you’re young enough)
I’m sure the equity income fund will tell a different story on returns. I plan to make that my next experiment. So far, I have only invested in individual stocks in the stock market both as an individual and with my investment club.
There you have it! I kept it at plain vanilla flavors for the beginner investor who wants to get started with a small budget. You can start with mutual funds and consider more investment options as your income increases.
If you are an experienced investor and already have a portfolio of assets , you can still check out mutual funds. The minimum investment required to invest in Stanbic mutual funds is N5,000 (¬$14), while the minimum investment required for the AXA Mansard investment is N2,000 (`$6). That’s what a lot of us spend on lunch sometimes. You can skip on the expensive lunch once a week or once a month, right?
Now it’s your turn. Which mutual funds have you invested in? What was your experience like based on the 3 factors discussed in this post? Click here to share your experience