Investment strategies to consider in 2021
The investment landscape in the year 2021 is still reeling with the impact of 2021. However, things are picking up, and to stay ahead, especially with raging inflation, you need to be deliberate in creating a mix of investment strategies.
Nigeria Today had a chat with an investment analyst, Ayodeji Ebo on what could be the optimal strategies for investors in the country in the face of persistent bearish sentiments in the Nigerian stock market.
According to Mr. Ebo who heads Retail Investment at Chapel Hill Denham, investors need to adopt mixed strategies and create a portfolio based on investment objectives. Investors need to increase their appetite, he said.
Below are 6 strategies investors may consider in 2021 to stay ahead of the pack, according to Ebo.
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1. THE FIXED INCOME MARKET: There has been an improvement in fixed income yields, but there needs to be diversification, said Ebo. “Therefore, we would advise investors based on their investment objective and risk appetite to create a portfolio. Their portfolio would have asset classes starting with the fixed income. They can do some short-term fixed income instruments, in the likes of treasury bills, commercial papers. They also need to look at bonds, which will also give them consistent cash flows.”
2. DOLLAR-DENOMINATED INSTRUMENTS: “Investors can also look at the dollar-denominated instruments. In terms of dollar inflow, Nigeria is a mono-economy based on the proceeds of the dollar from oil. Therefore, we believe that our foreign exchange crisis will persist and if we don’t diversify, our FX earnings would continue to be challenged when there is a major disruption in crude oil prices,” Ebo said.
He added, “Because of that, dollar-denominated investments in the likes of Euro bonds, dollar mutual funds will provide ideal investment opportunities. Some investors may also want to trade in foreign stocks.”
3. INVEST IN THE STOCK MARKET: Investors looking to stay ahead may also consider the local equities market, according to Ebo.
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He said investors should invest on the stocks of some sectors that are positioned to do well this year.
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“The oil and gas sector were seriously beaten because of the COVID impact. We expect that there should be improvement in that space.
“Also, if you look at the FMCG, with the low interest rate environment, they were able to raise capital to refinance and they have the ability to increase their prices though demand is is still coming up, but the increase in price is compensating for that,” he said.
4. BANKING SECTOR: Ebo also identified opportunities in the banking sector. He said, “They have always been able to navigate their way despite the challenges. This year, we thought it was going to be challenging, but the improvement in yields environment, it will cover up for that gap. We believe that there will be opportunities within that space.”
5. TELECOMS: The telecoms sector would also be a major sector to watch, according to Ebo. He said, “We know that with the business disruption, working remotely has become a new norm and that has resulted to increased use of data. We believe that this new trend will also sustain yields in that space.”
6. AGRIC SECTOR: Investment in the agric sector had sustained pace despite the COVID-19 disruptions. The investment in the space has been driven by crowdfunding though technology and massive interventions by the government. That is why it was one of the economic growth drivers in the recent GPD report. As such, Ebo said he “believes that the Agriculture space will also sustain positive momentum