Where to invest my July salary

The saying that a workman is only as good as his tools could also be said of an investor. Investors’ returns are solely dependent on the asset they decide to put their money behind.

Put your money behind a bad horse and you are almost guaranteed to leave empty-handed.

However, deciding on what to invest in can be a daunting task as in most cases, there are no guarantees of profits.

For instance, stock pickers are not assured of returns because the asset may not appreciate in their investment period. Investing comes with inherent risks of ruin and only carefully calculated bets should be made.

The first half of the year offered a lot of opportunities for investors, and we have seen a relatively good rally in benchmark indices across the globe.

Year-to-date S&P 500 is up 18.18%, NASDAQ 34.24%, FTSE100 3.23%, NIKKEI 225 25.54%, NGX ASI 10.70%.

In the short term, however, some assets have started plunging following the great gains in the first half. Gold spot price fell from $2078 per ounce in May and currently trades for around $1948, a 6.3% decline.

Cryptocurrencies like Bitcoin and Ethereum have also fallen after forming intra-year highs. BTC dipped 5.5% from its intra-year highs of $31,035 in June to $29,300.

Are these signs of assets generally weakening off after a great first half for a continuation rally or a resumption of the bearish sentiments of the last year?

Either way, it is not advisable to enter full positions after a long-winded rally. A better alternative is a method called Dollar cost averaging where the asset is bought at regular intervals instead of a lump investment.

Where to invest your July salary

Experts recommend investing anywhere between 10-30% of your income. Also, it is an investment rule of thumb to only invest amounts you are willing to lose.

Here are four suggestions on asset classes to invest in:

Treasury bills: Treasury bills are considered one of the safest asset classes and offer better returns than interest on savings. The Nigeria 364 days treasury bills have a rate of 10.588% per annum. Since Treasury bills are government-backed, the risk of default is ever so low and is recommended for conservative investors.

Exchange-traded funds ETFs: Exchange-traded funds are a basket of similar assets that an investor can invest in at once instead of picking an individual asset.

An example is Energy Select Sector SPDR Fund XLE which comprises top energy stocks in the US market. Instead of picking individual companies in the energy stock, an investor can invest in the XLE. This approach is less stressful and recommended for investors who do not have the expertise and experience of stock picking. The XLE has a 38.65% three-year return. The Technology Sector Select SPDR fund has a 43.61% year-to-date return.

Eurobonds: A Eurobond is a debt instrument that’s denominated in a currency other than the home currency of the country or market in which it is issued. For example, the Nigerian Eurobond floated by the Federal Government is denominated in US dollars, and yields are also accrued in dollars. This is also a great way to protect your assets against Naira depreciation. With the current volatility of the Naira against the dollar, investors who want some degree of stability can look to diversify their portfolio in Eurobonds.

Mutual funds: Mutual funds are tailored financial vehicles that pool assets from shareholders to invest in securities like stocks, bonds, money market instruments, and others. The funds are usually managed by professionals at investment firms and banks. In Nigeria, investment firms like Stanbic funds management, United Capital Asset Management, etc offer funds that have yields anywhere between 8-15%. It is important to note though that investing in mutual funds attracts risks and returns are not guaranteed.

With the current economic situation in the country, it is a plus to have some sort of investment that yields passive returns. These may not necessarily substitute your main income but could take care of some bills or supplement your earnings. These investment classes discussed above are great options to look at.