HOW TO DODGE THE DEVALUATION & INFLATION BULLET
By Lácedar Terry
About 2 years ago (2019), if you had ₦360, you could buy $1. Simultaneously, 6 years ago (2015), ₦200 could buy you $1. But today, that same ₦360 can only get you $0.75 and that same ₦200 can only get you $0.41. This means that there is a significant loss on the value of your investments in Naira by 25% and 60% respectively.
Another factor is Inflation. Why this factor is very worrisome is because, apart from the impact of devaluation, the local currency has lost its purchasing power quite significantly.
So, the question is this, how do you build a portfolio that helps you maintain the value of your investments and dodge the devaluation and inflation bullet the economy keeps firing at us?
There are five ways to do this and I am going to tell you:
1. EQUITY/STOCK INVESTMENT: As an avid investor who wants to protect his/her investment and protect your finances, you should start asking about equity. You want to know how you can get your hands on equity investments and cop them for yourself.
The equity market is known as the stock market and is known to be one of the most stable markets for investments. This is because companies tend to factor in inflation and devaluation in the prices of their goods and services so their output can still be maintained.
As the company’s value grows, your investments grow and you can actually stay ahead of the impact of inflation and devaluation.
2. COMMODITIES: Commodities have been known to hedge during periods of inflation and devaluation. Commodities can include gold, crude oil, agriculture, etc. Investing in commodities not only provides you a significant cash flow but helps to protect your investments from devaluation.
3. EXPOSURE TO FOREIGN CURRENCY: Exposure to foreign currency helps you to hedge particularly against devaluation and quite a lot of options exist to provide this.
As an investor, you could look into investing in dollar-denominated Mutual funds (such as treasury bills), as well as Euro bonds. Although mutual funds are available in the retail market but can have returns as low as 2–3%, which might turn off some investors looking for a significant cashflow.
4. REAL ESTATE: Real estate has since demonstrated a strong capacity to keep up with economic imbalances. From rental income appreciation to actual asset value appreciation, real estate has performed relatively better than the equity market over the years, in terms of capital appreciation, especially in Nigeria.
5. ONE SQUARE METER: If you find Eurobond or mutual funds too complex, and would rather invest in a dollar-denominated real estate investment instrument while being able to know exactly what your returns are per time, One Square Meter would be right for you.
This product was created so retail investors can hedge against the Naira devaluation through the RTO DOLLAR FUND and get guaranteed returns on investment, up to 6% on the dollar, paid upfront annually on a 6-monthly basis.
One advantage of One Square Meter is the fact that you can convert your investments to equity if you want to buy the properties that would be developed using that fund.
The current state of the Nigerian economy is likely to stick around for a while or even get worse. It would be profitable to begin to look into investment instruments that would scale up your investment value rather than torch down your years of work.
For more advice on knowing the right investment for you, you can learn more here
Reach out to us on 08180000113 or visit our website www.onesqm.ng
