Here’re five ways to diversify your investment in 2025

As 2025 promises to bring moderation to the naira and inflation, analysts say in a stable, high-yield environment the fixed-income market is expected to continue to be appealing.

Cowrywise, in a recent report, has highlighted five ways Nigerians can diversify their investment instead of allowing money to remain idle.

The wealth management platform in its Nigerian Economy in Retrospect: What You Need to Know to Invest in 2025 report, money market funds (30 percent), equity funds (30 percent), bond funds (25 percent), dollar funds (10 percent), and cash funds (5 percent) emerge as the top choice for Nigerians to diversify their investment portfolio and reap bumper harvest.

Diversification remains a key strategy for investors seeking to optimise returns while minimising risks, i.e. how you distribute your money across several investment types.

Cowrywise in a report said, “The risk that each asset carries is different and so are its returns. So if some asset classes don’t perform well, others might and this helps to cushion your portfolio against unpredictable crashes.

“Diversification allows you to reduce your risk without reducing your return. You get to enjoy perks such as better possibilities, learning about new assets, and higher risk-adjusted returns,” it added.

Here are the five ways:

Money market funds

According to Investopedia, a money market mutual fund is a type of mutual fund that invests in high-quality, short-term debt instruments, cash, and cash equivalents.

Cowrywise said yields from the money market are expected to remain elevated till at least the first half of 2025 before seeing any moderation.

Therefore, securities like treasury bills, commercial paper, certificates of deposit, and repurchase agreements are expected to be attractive.

Equity funds

An equity fund refers to an investment fund that is primarily invested in equities or stocks.

“The equities market is projected to sustain its strong performance in 2025, driven by better macroeconomic conditions,” Cowrywise said.

These funds aim to generate growth by investing in equity securities, making them a popular choice for long-term investors seeking higher returns compared to other investment options like bonds or fixed deposits.

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Bond funds

A bond fund is a mutual fund or exchange-traded fund that buys debt assets to produce regular monthly income for its investors.

“As 2025 progresses, we expect potential yield moderation, which will enhance the appeal of bond funds. Typically, bond funds perform better when interest rates are stable or declining,” the report said.

For many investors, a bond fund is a more efficient way of investing than buying individual bond securities. Unlike individual bond securities, bond funds do not have a maturity date for the repayment of the principal, so the principal amount invested may fluctuate from time to time.

Dollar funds

Dollar funds, also known as USD funds, are mutual funds that invest in US dollar-denominated instruments and are regulated by the Security and Exchange Commission (SEC), e.g., Eurobonds, US$ bank deposits, etc.

Cash fund

Cowrywise in its report said a five percent fund should be diversified across this fund as cash funds are made up of cash and cash equivalents that are designed to be safe and liquid rather than high-risk environments that could result in higher returns.