1. Global financial markets have been awash with cheap money and government funded assets purchase pushing assets value (bonds, equities, derivatives etc except a few commodities).
The result is that very many assets are selling at prices above their usual long term average
2. Frontier markets, where we fall in, have been somewhat insulated from these global assets over-valuation due to our uncorrelated risks factors -- political, commodity, currency etc.
However, due to the low activity levels of our financial markets, how much impact the foreign money movements (that are actually small in global relative scale) have in our markets and how little those movements correlate with actual fundamental values of our assets, our markets can be affected by these global markets issues.
3. Currently our stocks are fairly priced (not over priced as those in the developed markets) but still carry a considerable risk of going down due to the global assets sales US, EU and Japan central banks are embarking on.
These activities will jolt the market and most likely bring a price correction (a sort of painful reversal to mean) that often leads to foreign investors pulling money from emerging and frontier markets to "safe" assets like Gold, Bonds (especially as the US rates are rising).
Also, factor in the usual outflow around our election period.
4. If you are stocks heavy and might need to meet some financial obligations that may mean using some of your stocks money soon (technically speaking, less accommodating of volatility), you should rethink your portfolio now and do an optimal mix of assets type.
I am putting money I may need this year and next year in low volatile (actually, high-yield savings type) assets.
5. If you have foreign investment assets, then you need to take these current happenings really seriously. Think through the impact of a likely market correction to your investment assets and your ability to handle the outcome (losing or not losing your sleep).
Also, think about the opportunities that a market correction will present. That's my favourite part, the opportunity to buy cents on a dollar value.
6. We are fortunate in Nigeria. High ranking hedge fund managers, Vanguard fund managers and celebrity status investment managers in the developed countries seldom do as well as our money market returns.
Even, academic and research publications extolling the superior returns of stocks investing over other investing vehicles (real estate, bonds etc) always state that the S&P 500 has a long term returns of 9% annual rate.
To grow your money in Nigeria, you just need to have a good savings habit!
Yet we get way more than that in our money market. And with the magic of compounding that means your money doubles every 7 years for a 10% return rate and every 5 years for a 15% return rate. That is a very big thing that turns to pure magic if you save/invest periodically (monthly or quarterly). It is called the magic of compound interest.
So, to grow your money in Nigeria, you mostly just need to have a good savings habit.
And about the effect of inflation, in reality, it is not as terrible for an individual as it is often painted.
Beyond a few multiples of your autonomous consumption (living expenses), the effect is very muted for an individual. If you have N25 million growing at 10% yearly and your yearly living expenses are N1.5 million, even if inflation rate is 15%, it will take decade(s) before it will ever affect you.
The problem is if you borrow money, then the effect is greatly accelerated as you must pay positive real interest rate on the loans taken.
