• Monday, May 27, 2024
businessday logo


Here are top 5 investing trends to hedge against inflation

Navigating government policy changes: Safeguarding your investments in an ever-changing landscape

Since the naira devaluation, inflation and rising interest rates have been the most nettlesome thorns on Nigerians side.

According to the National Bureau of Statistics (NBS), inflation rose to 33.3 percent in March, a 4.7 percent increase from the rate in February.

Those barbs dug deeper as the Central Bank of Nigeria (CBN) hiked rates three times—a move that may bode well for savers but loom large for spenders.

The CBN hiked the Monetary Policy Rate to 24.75 percent at the last MPC meeting as part of their efforts to stabilise the foreign exchange (FX) market and naira volatility.

With rising inflation and hiked interest rates, these trends can help you hedge against inflation and grow your wealth, according to investment experts.

Real Estate gives higher returns

If you want to beef up your investments against inflation, real estate investments should be a top consideration.

“Real Estate is an asset that can give returns higher than the current inflation rate of 33 percent. Several players in the real estate market have broken property investments into units so you do not have to buy a house but can be a co-owner, ” Segun Sopitan, Principal Partner at Woodridge and Scott Consulting said.

Commodities benefit from inflation

Commodities prices often rise with inflation rates, which makes it a workable strategy to hedge against inflation.

“The commodities market offers a variety of options for investors to invest in, with minimal amount. With as low as N50,000, you could invest in a basket of various commodities that tend to rise with the inflation rate and give you high returns on investment,” Fadeelah Abiru, Economic Analyst at Marble Capital said.

Invest in select stocks on the NGX

Analysts at Coronation Registrars identified a selection of NGX-listed equities that give a consistent Return on Equity of over 20.5 percent per annum and pay dividends.

They noted that this portfolio beats inflation over a period and the Naira fixed income returns. These companies include; Dangote Cement; Nestle Nigeria; Guaranty Trust Holding Company (GTCO); Zenith Bank; Stanbic IBTC Holdings; Dangote Sugar; Okomu Oil; Presco; NASCON, etc.

“Last week the Model Equity Portfolio fell by 1.22 percent compared with a fall of 1.39 percent in the NGX All-Share Index, outperforming it by 17 basis points (bps). Year-to-date it has returned 42.61 percent compared with a return for the NGX All-Share Index of 31.27 percent, outperforming it by 1,134bps,” the Coronation weekly update stated.

Invest in dollar-denominated Assets

Experts have pointed out that investing in dollar-denominated assets is the best strategy to hedge your fund.

Segun Sopitan, Principal Partner at Woodridge and Scott Consulting, is bullish on dollar-denominated assets, noting that many digital platforms give access to international stock exchanges such as the New York Stock Exchange, NASDAQ, London Stock Exchange, etc.

“You can invest as much as N100,000 and as low as N10,000, in these various exchanges. That’s the safest strategy because there are many other dollar-denominated investments, but this gives safety of capital and becomes a high-yield investment,” he said.

Savings will bring your investments to life

Consistent savings are an important way to ignite your investment journey.
“Unless you’re getting an inheritance or money from somewhere, then you need to allocate a percent to saving. Also, avoid putting your savings in a bank or any low-yield accounts. Rather, put your money in high-yield accounts or income-yielding assets,” Olanrewaju Balogun, Financial advisor at Pride Capital said.

Finally, investment experts stressed that due diligence is a no-brainer in making investment decisions.

Sofiyyah Elesin, Economic Analyst at Marble Capital also noted that savvy investors are disciplined and consistent in investing for the long term.

“Investment is a long-term goal, so investors must be patient enough in building wealth. Educate yourself and diversify your income,” she stated.