Is It Still Wise to Invest in Naira?

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Is It Still Wise to Invest in Naira?
Is It Still Wise to Invest in Naira?

Good morning and how are you doing? 

Friday letters are usually dedicated to taking questions from our community. Do you have a question for us? Please feel free to send an e-mail to info@themoneyafrica.com or a DM to any of our social media channels.

Question

Is it still wise to invest in naira as naira is losing value?

Answer 

What exactly do you mean by losing value? Is it the fact that the naira keeps depreciating in value compared to other currencies?

Both naira and dollar investments have some potential.

However, people often raise concerns about the current state of naira devaluation. These concerns are valid.

When we say that the naira is reducing in value, we are talking in terms of exchange rate and inflation rate.

The alternative is to source for investments in higher valued currencies, e.g, dollars.

While it’s advisable to go for dollar denominated investments, naira denominated investments can also be a good option to include in your investment portfolio. This is as long as the expected rate of return beats the long run inflation rate.

As of September, the US inflation rate is 5% while the Nigerian inflation rate is about 16%.

Question

What is the difference between stock gains and dividend yields?

Answer

Stocks are a form of investment assets that allows you to buy part of a company. When people invest in stocks, they gain money in two ways—capital appreciation and dividend payments.

Capital appreciation occurs when the value of one’s invested sum increases. If an investor bought a unit of a company’s stock for ₦1,000 for example, and the price of the stock increases to ₦1,500, then the investment is said to have gained 50%. This 50% gain is referred to as capital appreciation.

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Dividends are a portion of a company’s profit that is shared with investors.

Dividend yield is a financial ratio that tells you the percentage of a company’s share price that it pays out in dividends each year. To get this, you need to divide the annual dividend per share by the current share price.

Dividends have also historically grown faster than inflation and can help investors outpace inflation.

Question 

I heard Facebook has changed its name to Metaverse. I own the company’s shares, and I’m concerned if this affects my investment in any way.

Answer

The new name now reflects the company’s growing ambitions beyond social media. This does not mean that the company has changed totally.

It has adopted the new moniker, based on the sci-fi term metaverse, to describe its vision for working and playing in a virtual world.

Metaverse is simply used to describe the concept of a future version of the internet made up of persistent 3D virtual spaces linked into a perceived virtual universe.

The company said when announcing the new name that it will change its stock ticker from FB to MVRS, effective December 1.

Ticker symbols are arrangements of symbols and characters that represent specific assets listed on a stock exchange or that are traded publicly.

 

Wriitten By: Oluwatosin Olaseinde