Nigerian Exchange Limited (NGX) has stressed the need for realignment on diversification of portfolios by investors to ensure enhanced return on investment.
Jude Chiemeka, Divisional Head, Capital Markets, NGX, said this at Leading Conversations with FBNQuest webinar themed: Exploring the Relevance of Diversification held recently.
He noted that diversification was a way of “edging your risk with the strategy that you deployed to manage your risk in a manner that will help you meet your investment objectives. In the long run will help you smoothing out your return and also help to ensure that the whole various risk that will affect market being liquidity, political risk all those risk affecting investment are managed in a way that allow you to meet your long term objective with the saying, (don’t put all your eggs in one basket).”
Chiemeka also emphasised that investors had to weigh the risk when making a decision. “The younger investors still have a long time and will be looking to invest in instruments that have the ability to turn around over a longer period of time should be invested in equities.
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In equities, we are looking at growth not necessarily the blue chips. “Those who are closer to retirement should not take the same risk level like the younger ones. That the perimeter realigns heavily in investment objectives, income, age and return on investment,” he added. He also advised on portfolio diversification, which helps to address some of the issues brought by the Russian and Ukraine war that is affecting the world economy.
“The high inflation environment is not necessarily affecting Nigeria alone. It is a global phenomenon that poses risk to return. You need to have an investment that you can hold over a period of time. “You can also own bonds like fixed income securities in your portfolio that will help you move out high volatility that bedeviled probably see in some markets. “Our market has grown over 20 per cent and you can see in the last three months there is some volatility as investors begin to look at all the rising rates. “Sincerely, fixed income is the best approach at this time. Also think about commodity base products, and look at the products we have at NGX some have grown 65 per cent return year to date,” he noted.
As a multi-asset exchange, Chiemeka said NGX had various products for every investor regardless of what their investment goals, risk appetite or return expectations might be. He listed the products as equities, fixed income, Exchange Traded Funds and recently launched derivatives.