There are many ways to make money. You could be a salaried employee, run your own business, or be an expert. After you have taken care of all your immediate needs, you are likely to have some money left over. Do you spend it on something else? If so, what? Keep it as cash or put it in your bank. Or do you use it well so that you earn a good return on your investment?
In the same way that you need to make money, you need to invest your money as well. Wise investments help you protect your money by meeting your financial goals for the present and the future.
At a point in time when rents are skyrocketing, other expenses are going through the roof, and inflation keeps rising, investing allows you to make money in a different way. Investing wisely allows you to build more wealth, and in some cases, make money that grows faster than inflation.
It makes sure that you have enough money to live on after your regular income stops.
Active vs Passive Investing for Nigerians
In order to build wealth, you have to be consistent and dedicated. It's not just a numbers game. In the end, you'll want to think about how long you want to invest and how much risk you're willing to take before you start. Below are the three ways you can invest your money wisely.
Set a goal for your money
Find out what your investing goals are, when you need or want to reach them, and how much risk you're willing to take for each.
Goals for the long-term: Everyone wants to retire, but there may be other goals you want to achieve as well. I want money for down payment on a house or an MBA degree. Or 10 years from now, do you want to buy your dream vacation home or go on a trip with your partner?
It could be next year's vacation, a house you want to buy next year or your wedding. Most of the time, money that is meant for short-term goals should not be put into anything at all. For short-term goals, check out our saveIN products.
Decide how much help you need
Once you know what you want to do with your money, you can think about how to do it (from picking the type of account to the best place to open an account to choosing investment vehicles). You may need to engage professionals if the DIY route is not for you.
Choose investments that are in line with your level of risk-taking
A very important step in figuring out how to invest money is to figure out where you should invest. The answer will depend on your goals and how much risk you are willing to take on in exchange for better investment returns. Investments that are common include:
- Insurance plans
- Mutual funds
- Fixed deposits
- Savings products
- Real estate/REITS
- Fixed-income investments (bonds)
- Stock market
- Commodities and so on
The most important thing to remember
There are many ways to build a strong investment portfolio with stocks, bonds, mutual funds, real estate, and others. It all depends on how much extra cash you have, how much risk you are willing to take, and when you might need to get your money back.
