Why Mutual funds remain the investment of choice

Mutual funds is an investment instrument designed mainly to gather the capital of individuals or entities that may not have the financial muscle to unilaterally plunge into the capital markets. It is also crafted to meet the needs of individuals or organisations who are interested in financial investments but lack the technical knowledge required to navigate the intricacies of the market. With mutual funds, these individuals can gather their money into a pool in the custody of seasoned financial experts who decides what instruments to invest the pool. Each individual that contributed to the pool has ownership stake in the fund in proportion to his contribution to the fund.
We have various categories of mutual funds, owing to the various assets they're invested in.
• Money market fund: These funds are mostly used in purchasing short term securities. Examples of such securities include Federal Government treasury bills, certificate of deposits, municipal bonds etc. A considerable proportion of money market fund is invested in treasury bills. Interest earned on the investment is distributed to members of the investing public that purchased units of the fund, otherwise known as unit holders. Unit holders may choose to cash out the interest or reinvest it in the fund. By so doing, they reap the benefits of compounding interest. Interest is mostly paid every quarter.
• Equity income fund: This fund is mostly invested in quoted stocks. The fund manager selects stocks with the best yield for unit holders and invest in them. Dividends accruing to the fund is distributed to unit holders. When profits are made from the sale of stocks, the Net Asset Value of the fund increases. This leads to capital appreciation for unit holders.
• Fixed income fund: This fund is mostly invested in banks fixed deposits. Mouth watering interest is earned which is distributed to unit holders according to the size of their holdings.
Mutual funds can still be categorized on the basis subscription period. They are:
• Open-End mutual fund: This fund allows Investors or unit holders to enter and leave the scheme at any time. The fund is thus ready to offer or redeem the units at any time based on their current asset values.

• Close-End mutual funds: Subscription to these funds have opening and closing dates. They are not open to new investors once subscriptions close. However, they can be traded on the floor of recognized stock exchange.
Mutual funds offer immeasurable benefits to unit holders, making it the best investment instrument for the youths. Below are some of the benefits.
• Low capital requirement: One factor that scare most young investors is the high capital requirement for financial investments. Most stock brokers require a minimum initial deposit of between One hundred thousand naira to Five hundred thousand naira for investment in blue chip stocks. Same with purchasing of treasury bills. These amounts are far beyond the reach of most Nigerians who are interested in financial investments. But with mutual fund, one can open a money market account with as little as five thousand naira. Moreover, an investor can choose to invest a lump sum or in installments.
• Mutual funds are regulated by Securities and Exchange Commission(SEC). This commission provides the regulatory framework that put the fund managers in check to ensure the safety of investors fund. They determine the minimum standard of operation for the fund and monitor their activities closely. Investors can petition their fund manager to the SEC when they feel shortchanged and the SEC has the power and obligation to sanction any fund manager breaching the provisions of the law guiding their activities.
• Mutual funds are managed by professional fund managers. Most young investors lack the technical knowledge needed to take on the complexities of financial investments. This is where the experience and expertise of professional fund managers come in. Mutual fund is an instrument through which novice investors can hand over the management of their funds to an experienced fund manager. These fund managers possess the expertise needed to analyze securities and other investment opportunities that can give the best yield to their unit holders.
• Liquidity - No rational investor want his money to be locked up in an asset. There are situations where investors in the capital market find it difficult to sell off their stake. But mutual funds investors can easily redeem their holdings.
• Steady flow of income through interest and dividends. Mutual funds usually pay interests or dividends as the case may be every quarter. Unit holders may choose to withdraw or reinvest their dividends in order to get it compounded.
I can go on and on. The list is exhaustive. The benefits of mutual funds investment especially for the youths is immeasurable. It simply provides opportunity to test the financial market and get insight how money compounds with time. It is the best way to start investment. Some reputable fund managers like Investment One Financial Services with their Money market fund (Abacus) is simply amazing. Another fund manager Axa Mansard Investment Limited with their money market and Equity income fund is still doing very well. I encourage the youths to explore the benefits of mutual funds for their own benefit and to contribute to capital formation in Nigeria.

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Why the youths need more of financial literacy

Financial literacy refers to the set of skills, knowledge and capabilities that allows an individual to make informed and effective decisions with their financial resources. Throughout our lives, we have to go through the cycle of earning, saving, spending, borrowing and investing money. However, many lack the knowledge and strategy to maximize their financial decisions.
Given the knowledge gap and lackadaisical attitude that exists towards money management and financial planning, there is a great need to develop the necessary skills and knowledge at an early age. Against this background, it is important that the youth become well informed about financial literacy for the benefit of our economic future. This will prepare the youth to successfully transit from the safety of their parents homes to the real world economy.
Financial literacy is more than just being able to open a bank account or acquiring a credit card. It is at the heart of our economic future and long term security. It includes skills such as financial action planning for the future, and the discipline to use those skills to make sound and informed financial decisions every day. It also involves knowing the various products available in our financial system and how to use them for our own benefits and to improve our national economy. Financial products are not made exclusively for the rich and working class as erroneously believed by the youth. Some products like FGN bonds, state government development bonds, mutual funds etc can be affordably accessed by the youths. Getting involved with financial products benefits the youth not only in earnings but it serves as an avenue to get deep and practical knowledge about the economy and factors affecting it. Seventy percent of those swindled in the ponzi craze that hit the country last year were students. If the students are financially literate, it would be difficult for ponzi scheme vendors to make a kill from them. Ensuring that the youth become financially capable is now widely seen as a necessary ingredient in building our economic future and stability.
Financial literacy can help us develop competencies in areas such as budgeting, credit card spending and even retirement savings. This makes sense because parents generally shy away from discussing money with their children. Some parents don't even possess sound financial literacy themselves to be able to pass the message across to their wards. Financial literacy can be enjoyable for parents if a case study approach is adopted. For example; do I want to spend money in acquiring what someone else has without thinking of the personal financial implications? The method adopted in passing the financial literacy message across is vital, and as a society we have an obligation to prepare the youths to make wise and informed decisions in this modern world. Sound financial literacy goes beyond just to 'save for the rainy days'. The financial world has become more sophisticated and complex today than it has ever been and the youths need to know early enough that a credit card is not actually free money, but one of the expensive ways to borrow money. If not used correctly, it may end up being albatross for the individual and can lead to excessive debt.
It will also enable the youth to acquire the knowledge, skills and confidence that they need, not only to be able to manage their money effectively, but to know the various avenues and means to

invest, so as to contribute to economic growth. Looking back, many of the older people today would admit that if they had possessed the skills necessary to manage their personal finances earlier in life, it would have encouraged them to aspire for greater goals and achieve more. Some of the disadvantages of not acquiring financial literacy early in life are that the individual may be susceptible to fraud or not even see the relevance of saving for retirement. Building financially capable populations has massive future benefits for the economy.
This advice sounds very simple but, having the discipline to adhere to it in our daily living is difficult. However, a strong background in financial literacy will prepare the youths for the financial realities that awaits them.

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Before you start forex trading, read this

Forex trading simply refers to making money from the fluctuations in the value of different currencies. For instance, it may take 1.812 euro to buy 1 US dollar today but may take 1.869 euro to buy 1US dollar tomorrow. In the short term, forex trading can be very speculative. It can bring fortune within a short period of time, but it can equally render you broke and depressed. 

After a long journey in the world of forex trading, I came up with the following truths which can guide anyone who want to engage forex trading as a business. 

Understand the fundamental 

There are events or factors that

determine or affect the value of a country's currency. Such economic factors like interest rate, GDP,  budget surplus or deficit, inflation rate affect the financial markets generally in the long term. Political occurrences like wars, terrorist attacks, bilateral agreements, mass protests etc affect the financial markets in the short term. Some other natural fallouts like earthquake, hurricane, tsunami and the likes affect the markets too on short term basis. It is very important for forex traders to be aware of the various impacts of these events on the financial instruments they wish to trade. We refer to these factors as fundamental because they are the underlying reasons why value of currencies fluctuate against each other. They determine the currency that gains value against the other. 

Focus on a single instrument 

Most forex brokers have an array of trading instruments ranging from currencies, commodities, Cfds, indexes to cryptocurrencies. Most of the time, unwary traders try to trade all the available instruments. This is a recipe for monumental losses. However, it is advisable   for traders to test a number of instruments on a demo account in order to determine the ones they are comfortable with. After then,  focus on that instrument and study to increase your proficiency in that particular instrument. Know the major factors affecting that instrument.

Control your emotions 

We're human. Emotions make us stand out among living things. That's why I never said eliminate your emotions. Emotion always affect our decisions especially when dealing with real money. However, it is very important to put emotions under effective control when trading financial instruments. This can only be achieved by having a plan and sticking religiously to the plan. For instance, I use weekly charts and I only place trades on fridays. I try as much as possible to avoid placing orders during the week. Financial markets is not a place to catch fun. It's a boring venture. If you're catching fun in the market, then there's something wrong about what you're doing. Don't trade on any instrument just because you have an emotional attachment to it. Trade only on instruments which works well with your trading strategy.  

Use long term timeframe 

As a retail trader, it is difficult, if not impossible to know where the market is headed on the short term. But with sound knowledge of fundamentals coupled with charting technique, a retail trader can break even and go ahead to make fortune long term. Short timeframe induces overtrading and accumulation of trading commissions eat deep into profit. Short timeframe also hasten emotion-induced trade. 

Always search for information 

Financial markets generally is always in a flux. It is highly dynamic. It is not meant for the sluggard. Staying informed is critical for survival. Participants in the markets are expected to dig deep for financial and business related information, not necessarily to place an order at any turn of events but, to understand how all those information may likely have an impact on the markets. Retail investors, or traders as the case may be, are encouraged to read business sections of newspapers and magazines, some business websites like Bloomberg, CNBC, business day newspaper etc. These resources are replete with useful insights for traders. 

Don't be an island 

Though independent judgement is vital in trading financial instruments, it is advisable to always look out for avenues to share experience with other traders. By so doing, your pool of knowledge increases. Nobody knows it all. Attend seminars, workshops and other events where issues relating to financial markets are being discussed. It is needed for enrichment of your knowledge base. 

Make it simple 

Most brokers have plethora of indicators for various trading strategies. The internet is also replete with software developers trying to sell their indicators. Most of those indicators are not needed for your success in the market. Use simple tools like Trendlines and moving average, you will see how simple, neat and less complicated your charts would be. Loading a chart with multiple indicators always make things complicated and leave the trader in a situation known as analysis paralysis. 

Avoid tips and Robots. 

The webspace is full of vendors trying to give tips about the next profitable financial instruments and when to trade. This they do without considering that traders differ in their trading strategies, risk appetite, size of capital and timeframe. The same applies to vendors of robots, otherwise known as expert advisor. The truth behind it is that if those tips and robots are really fetching high profits as they want us to believe, they would not be willing to let them out. At least not without paying a fortune. Another pitfall of using tips and robots is that they place limitation to your ability to learn and understand how the market works. 

Finally, it is important to note that trading financial instruments is not a get-rich-quick scheme, neither is it a money doubling scheme. It is not an avenue to double your capital in no time. Success in the market is a gradual process. It needs hardwork, patience, discipline and consistency. Keep on improving. Success is sure!

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Welcome! Its Simply Finance

We're here basically to galvanize the consciousness of young minds towards achieving financial literacy. This project is equally geared towards raising enlightened young Nigerians who are interested in getting sound knowledge of the financial markets in a clear, concise, simple and well analyzed format. We're here to familiarize the Nigerian youth with a wide range of financial products both within and outside Nigeria and to take them by the hands and show them how to practically explore the financial world. Investing in financial products can really be complicated, no doubt. Here is the place to make it simple. Welcome on board! It's Simply Finance!!!

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