Top Investment Strategies You Must Learn About in 2022

November 11, 2022
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Mins Read
Table of Contents

We're living in a time where it's become quite necessary to have more than one source of income. Passive income provides the necessary support to maximize your active income. Plus, there are a plethora of Nigerian investment strategies where you can put your money to enhance your income. Let's look at some of the best ones.

Introduction

Every professional was once a beginner and had to learn about different investment strategies. What helped them become pros at their game was not luck or premium facilities - it was probably their deep understanding of the best investing strategy and a solid investment plan.

For instance, public figures like Warren Buffet weren't born billionaires - they had to devote their time to researching and exploring several investment methods. All of their hustles enabled them to become some of the richest people in the world.

If you're also a beginner looking for the top investment strategies in Nigeria, this article will tell you everything you need to know. You can adapt the techniques mentioned and choose the best one according to your financial and lifestyle goals.

Keep in mind that transitioning from a beginner to a pro takes a lot of dedication, research, discipline and consistency. Besides these, thorough market research and self-improvement are some of the crucial factors that can help you amp up your investing strategies.

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What are Investment Strategies?

Investment strategies are principles made to help investors achieve their investment and financial goals. They're a guide that helps investors with decision-making, future capital needs, and risk tolerance.

You can utilize these strategies to expand your portfolio in Nigeria, but you should know that these strategies are not static. You'll have to review these strategies occasionally as the situations change.

Your goals and risk profile guide the type of investment strategy you choose. Understanding what you are dealing with and how you will respond to the losses or risks is essential before dabbling in investments.

Several investing strategies for beginners suit most investors. By understanding the aspects of each, you can also be in a better position to choose the strategy that works for you in the long run without having to invest significantly.

Types of Investment Strategies

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When it comes to investment strategies in Nigeria, there's no one-size-fits-all; you'll have to study and inspect the best investment strategy that’ll be beneficial for you.

You'll have to realign and reevaluate the strategies as they age to adapt to your portfolios. To that end, Let's look at the best investment strategies you can go for:

1. Passive and Active Strategies

Passive and active investing strategies are among the top investment strategies in Nigeria.

The passive investment will allow you to sit back while your assets will make you profits. These assets may be rental properties, REITs, or index funds.

While this type of acquisition does need some research, you won't have to deal with the same day-to-day involvement as other types of investments. This is why passive investments provide you with regular income and retirement savings.

Active investment is a strategy where you must be involved with your assets. The most common example of this is flipping houses.

Another type of active investment is when investors have control over their stock portfolios instead of working with a financial academy or financial expert. This process is best for those who want to deal with their finances, whether via portfolio management or investing in real estate.

2. Growth Investing

The primary benefit of this type of strategy is that it offers exposure to quickly growing industries and sectors. In other words, you will distribute capital to establishments with higher chances of generating high yearly returns.

Stock investment is also among the exciting and top investment strategies you should not overlook. You can learn about the enterprises that will be creative and innovative in the future. However, when choosing this investment strategy, you should approach it with caution.

Growth stocks generally have the highest market valuation. They should be according to the market's expectations, which justifies the valuations. If you opt for growth investment stocks, you must study and avoid businesses based on ideas.

3. Value Investing

In terms of long-term returns, value investing has been the most consistent for more than 100 years. Warren Buffett has made quite a fortune by investing in corporations that offer steadfast earnings at higher prices.

Investors who choose a value investment strategy opt for stock trading at or below their fair or intrinsic value. If the stock's valuation is lower during the purchasing process, the lesser an enterprise will earn to make a decent return soon.

Value investors should understand the financial statement to determine a company's value. Investors must identify top-quality stocks that are cheaper and bound to make decent profits.

4. Momentum Investing

This type of investing is similar to growth investing, but you'll have to consider the momentum of the stock price rather than the revenue growth. The top-performing stocks in a given period usually have higher chances to outperform in the following periods.

Selling and buying decisions are made by assessing the price action, though it does also help avoid liquid and small enterprises. The best way to profit from momentum investing is to invest in 10–20 stocks and hold them for a year. After that, all the stocks are sold, and you should repeat the process.

Momentum investments will provide you with proper returns, but you will have to consider the occasional losses.

5. Small Cap Investing

By focusing on smaller companies, you'll get two primary benefits. First, it will be easier for the small firm to amplify its profits, which will double the revenue from the base level.

Another benefit is that investors generally overlook small enterprises, which will help you trade at discounted rates. As the company develops and grows, other investors will also be attracted, reducing the discount. It'll provide you with an extra return if you invest early.

However, you'll face several challenges when investing in small-cap stocks. It can be difficult to find information, thus increasing the time invested in researching.

Smaller enterprises are less liquid, and their share prices are volatile. You'll have to carefully manage the risks and avoid cases where liquidity diminishes before you get an opportunity to exit.

6. Dividend Investing

The goal of dividend investing is also called yield investing. It helps generate a strong income stream. Stocks with higher dividend yields are technically profitable but usually have low growth rates.

In this, your goal is to find enterprises with a good yield that continue to pay dividends. If an enterprise can increase the dividend yield, that's a good sign.

The best investing strategy is not all about income generation. If you reinvest the dividend, your yield portfolio will see significant capital growth. Firms that pay dividends are usually profitable and defensive during slumps.

7. Factor Investing

Investment factors are the characteristics of stocks that have outperformed for a long time. The common factors are value, market value, growth, and momentum. Other cited factors are quality and volatility.

In factor investing, the concepts are quantified and reduced to statistics. Several investment companies have launched exchange-traded funds (ETFs). These are the factors used for the stock index. This allows advisors and investors to build portfolios based on more practical evidence than theory.

8. Low-Risk Investment

Low-risk investment strategies are ideal for people of all age groups. The primary reason is that investors will see the return without risking significant monetary losses. In this kind of investment, the acquisitions are bonds, savings accounts, and CDs.

Another characteristic of a low-risk investment is diversification. In other words, you will spread your capital across different investments. Portfolio diversification will safeguard you against losses if one type of investment does not work.

9. Income Investment

In the cash income strategy, there are two types of income: dividends and fixed-interest income from bonds. You can choose this strategy if you are looking for a steady income.

In this case, your strategy should focus more on generating cash income with stocks instead of putting your money into them, which only increases the portfolio's value.

Investing Tips for Beginners

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Following are some investing tips for beginners to keep in mind:

  • Make Goals: You should set a purpose for how much money you need in the coming years. It'll allow you to focus more easily and choose whether to invest in long or short-term investments.
  • Portfolio Optimization: To improve your portfolio, you will have to choose the investment strategy that will give you the greatest return with the lowest risks.
  • Risk Tolerance: You should consider the amount of risk you can handle to get the desired return. It also depends on the long and short-term goals. If you want a higher return quickly, the risk will also be higher.
  • Consultancy: You should work with a good consultant or firm. They can help and guide you concerning where and how you can invest to reach your financial goals.
  • Risk Diversification: You should create a portfolio combining equity, debt, and derivatives to diversify the risks. Also, make sure that the two securities are not connected.

Benefits of Investment Strategies

Investment strategies allow investors to make the right and quick decisions. They can be goal-oriented and help investors make investment choices accordingly. The following are the benefits of investment strategies:

  • You can develop a portfolio from a single strategy or combine strategies to satisfy your preferences and needs.
  • You have diverse opportunities to invest in as a Nigerian and build a corpus. For instance, Pillow Fund provides returns of up to 14% on crypto investments. Then there are stock market investments, mutual fund investments, term deposits, and the like. Having structured strategies with a wide range of investment options can help you grow your wealth efficiently.
  • An investment strategy will allow you to gain maximum returns from your investments.
  • Investment strategies will diversify the risks in your portfolio if you invest in several types of investments and industries based on expected returns and timing.
  • You can reduce the transaction costs and will be liable to pay fewer tax amounts.

Limitations of Investment Strategies

The following are some investment strategy limitations:

  • Even after a lot of analysis, historical data, and research is conducted before investment, most decisions rely on making predictions. Sometimes, the returns and results may differ from your expectations and keep you from reaching your financial goals.
  • It'll be challenging for average investors to outperform in the market. They will have to devote years to make average returns, whereas an expert investor will earn the same return in lesser time. It's necessary to look at investing strategies for beginners, so you know the basics of investments.

How to Choose the Right Investment Strategy

Choosing the best-investing strategy is like purchasing a new car. Before looking at different models, you'll have to choose the style that suits you best. Just like cars, there are several investment strategies from which you can choose.

You will have to ask yourself questions like "What is my investment horizon?" "What amount of risk can I handle?" "What returns do I want to achieve?" You can build the best portfolio by answering these questions.

Your skills and experience will also boost your investment strategy in some industries. For instance, value investors should have a basic understanding of financial statements. If you can write codes, you should lean towards momentum investment.

Another thing to consider is the time you will devote. Growth, value, and small-cap investments need time and research. In contrast, passive and momentum investment takes lesser time. Don't forget to determine your risk tolerance in terms of both temperament and financial situation.

Conclusion

These are some of the top and best investing strategies in Nigeria that you can choose as a beginner or even if you're a professional looking to expand your portfolio. These strategies come with lower risks of losses.

Whatever type of investment strategy you choose, don't forget to do a lot of research and select those that will be beneficial for you in the long run. Research will make your investment choices better and more future-proof.

FAQs

  • How can you set up an investment strategy?

To set up an investment strategy, you'll have to consider several things, like your goals, skills, and investment horizon. The best thing to do is to stick to the industry in which you have experience since that will enhance your chances of getting better returns.

  • Index funds vs mutual funds: What's the difference?

Both mutual and index funds will allow you to invest in several types of bonds, stocks, and assets. Mutual funds are usually actively managed by the investment expert, whereas index funds are passive. There are higher fees in mutual funds than in index funds, which reduces the cuts in gains.

  • What are the best cryptocurrency investing strategies?

As a beginner, if you want to get comfortable with the asset classes' volatility, investing in blue-chip cryptocurrencies is recommended. Blue chip currencies like Ripple, Ethereum, and Bitcoin have a long-standing history.

When it comes to crypto investments in Nigeria, your best bet would be Pillow Fund, which offers a safe and secure platform to invest in the cryptocurrencies of your liking. Plus, to make your investment risk-free, Pillow offers up to 14% returns to all investors.

  • How would age determine which investment strategies you choose?

Age determines investment strategies due to the risk elements. When you're young, you can opt for riskier strategies because you'll have the time to cover up the losses that come with the risk.

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