Investors in Nigeria have been advised to expand their portfolios beyond equities by including alternative assets such as mutual funds, exchange-traded funds (ETFs), bonds, treasury bills and real estate. The call was made by Aruna Kebira, Managing Director of Globalview Capital Ltd and an economist, on Thursday in Lagos. He stressed that diversification is a key strategy for reducing exposure to volatility in the stock market and improving long-term returns. According to Kebira, concentrating funds solely in equities exposes investors to significant risk, especially during downturns in the capital market.
He explained that a balanced portfolio allows gains in one asset class to offset losses in another, ensuring stability across changing market conditions. When equities decline, investments in fixed-income securities or money market instruments can help sustain portfolio value. Conversely, when stocks recover, their gains can boost overall performance. Kebira noted that many Nigerian investors remain overly focused on equities due to familiarity with dividends and capital appreciation. This preference, he said, limits access to opportunities in other asset classes.
The economist highlighted that mutual funds and ETFs offer built-in diversification, as professional fund managers allocate capital across various instruments, including bonds and treasury bills. This structure provides stability even when the stock market underperforms. However, Kebira attributed the low uptake of such collective investment schemes to a lack of understanding. Many investors grasp stock-related concepts like dividends but struggle with terms such as distributions and net asset values linked to mutual funds. As a result, they opt for individual stock purchases over professionally managed baskets of assets. He reiterated that diversification supports long-term financial goals and reduces the impact of market cycles.
Aruna Kebira promotes portfolio diversification while acknowledging most Nigerian investors stick to stocks due to limited financial literacy. His advice exposes a gap between expert recommendations and the reality of retail investors who lack understanding of alternative instruments. If investors cannot grasp how mutual funds work, simply urging diversification may not change behaviour. The real challenge lies in simplifying financial education, not just reiterating strategies.
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