Futureview Group has said importance should be placed on portfolio diversification to maximise return on investment and minimise risk.
A report identified inflationary pressure as a major risk to return on investment across assets classes in its corporate analysis of the current analysis of Nigerian investor psychology.
The report said at the moment, many investors were apprehensive of the likely impacts of energy crises on the earnings of quoted companies at the end of the first quota this year.
It said that this had created another level of uncertainties in an investment decision.
The Managing Director and Chief Executive Officer, Futureview Securities, Ijeoma Amaechi, advised Nigerian investors to focus more on the stocks of companies with strong fundamentals to minimise risks.
Amaechi noted, ‘One of the key challenges facing investors in the Nigerian market is inflation. To earn a real return on investment, investors need to earn an ROI higher than inflation which is currently at 15.7 per cent.
‘This return can be achieved in the stock market because of the low-interest rate regime in the fixed income space.’
She said, ‘Unfavourable macroeconomic factors, as well as uncertainties surrounding pre-election year, are also negatively influencing investors’ appetite for risky assets.
‘Investors should diversify their portfolios and mix risk assets and fixed income assets. The risk assets will provide an opportunity for high returns, while the fixed income assets will provide a buffer against unexpected negative returns from the stock market. It is also noteworthy that investment in mutual funds is a hedge against inflation.’
She added, ‘Investors are advised to invest in companies with good fundamentals stocks. They should contact stockbrokers for proper analysis of the companies’ financials.
‘The securities professionals also conduct technical and fundamental analysis to identify underpriced stocks and determine their fair values and the right entry prices that will enhance their return based on the upside potential of the stocks.’
She added that most investors were either not savvy enough or did not have sufficient time to conduct proper research analysis before investing.
‘So they are advised to take advantage of the mutual funds managed by professionals who have the expertise and the time to do proper analysis and make the right investment decisions on behalf of the investors.’
