What Is An Investment? Types And Benefits Explained

What Is An Investment? Types And Benefits Explained

Investment is the act of putting your savings into a resource designed to increase the value of your funds. To put it another way, an investment is a financial item that is purchased with the expectation that it would yield larger returns down the road. You'll earn money by selling it for more than you paid for it. When your savings can generate a higher return than the amount invested, they are considered investments. A retirement fund, emergency fund, child's school fund, and other uses for money can all be made possible if the investments are used properly.

How Should You Invest?

1. Analyze Financial Needs: Analyze your financial status first, taking into account your risk tolerance, investing goals, and other elements like family size, the number of earners in your household, and your life ambitions.
2. Diversification: By investing your money in a variety of products, you may create a diversified financial portfolio that meets your investment goals while preserving the proper ratio of risk to return.
3. Time Period: You should also be aware that it can be challenging to determine what an investment means for a specific person without taking time into account. Therefore, when deciding what to invest in, keep in mind how much time you have before putting your money into investments.
4. Periodical Reassessment: You must regularly attentively monitor your funds because they are subject to market factors. If your portfolio isn't producing strong returns, you might also think about modification.

What Are The Benefits Of Investment?

1. Keep Money Safe: One of the main goals of investing for people is to preserve their capital. Your money can be kept safe with the help of fixed deposits, government bonds, and even a regular savings account. The goal of capital preservation is easily achieved even though the return on investment can be smaller in this case.
2. Help Money Grow: A long-term investment objective that aids people in securing their financial future is capital appreciation. The best assets for growth include stocks, commodities, mutual funds, real estate, and mutual funds. These options may carry a high level of risk. However, they frequently offer a sizable return.
3. Earn Steady Income: Investing can also assist you in generating a reliable supplementary source of income. Such investments include ones in fixed deposits that accrue interest regularly or stocks of businesses that continuously distribute dividends to shareholders. After you retire, income-producing investments can assist you in covering your regular needs.
4. Minimize Tax Burden: A short-term investment objective can be to reduce your total income by investing in things like ULIPs, PPF, and ELSS. Your taxable income will be decreased as a result, lowering your tax obligation.
5. Save up for Retirement: Retirement savings are essential. You might not be able to work forever, so it's crucial to have a retirement fund you can rely on in your golden years. You can allow your savings to develop sufficiently to support you after retirement by investing the money you make during your working years in the appropriate investment options.

Types Of Investments

There are multiple investment opportunities in Nigeria. Some of the major ones include:

1. Agriculture: Nigeria is estimated to have a population of about 200 million. And one of the biggest challenges is feeding this vast population. Because Nigeria cannot produce enough food to feed its population, it is severely dependent on imports. Companies with an agricultural concentration receive special financial assistance from a number of financial organisations, including the Nigerian ministry of finance. Agriculture is unquestionably one of the most important sectors for investment in Nigeria.

2. Real Estate: Real estate is one of the most profitable investment alternatives in Nigeria. This is a result of the population's rapid growth. Major migration as well as large cities like Lagos, Abuja, Port Harcourt, Uyo, and the rest. Real estate investments in major cities may be quite beneficial for investors. Affordable housing, building supplies, motels, shopping malls, and many more locations offer opportunities.

3. Oil and Gas: Nigeria's economy is reliant on the oil and gas industry. Investors from abroad and locally can capitalise on Nigeria's oil and gas industry and watch their capital increase. One of the world's top oil producers in Nigeria. Here are some areas of the oil and gas industry that investors should focus on.
• Exploration and Exploitation
• Products Marketing
• Pipe-lining
• Well Services
• Petroleum transportation

4. Mining: Nigeria is endowed with a vast array of natural resources, many of which have not received much attention. For a committed investor, investing in these underutilised locations can be quite profitable. Nigeria has a lot of undeveloped resources, and the government has repeatedly demonstrated its willingness to work with potential investors. Several of the resources are:
• Limestone
• Coal
• Iron metal
• Bitumen
• Gold
• Columbite
• Tin
• Uranium
• Marble
• Kaolin
5. Manufacturing Industry: Nigeria is a nation that is overly reliant on importation. There is a need to make many goods at home as the economy expands. The workforce is available. Nigeria's manufacturing industry will benefit from investments in it. It will expand the economy and provide jobs.

6. FGN Savings Bond: The Debt Management Office (DMO) on behalf of the Federal Government of Nigeria issues FGN savings bonds. You are making a short-term loan of money to the Federal Government of Nigeria when you purchase an FGN savings bond, and you will receive interest. Because it has the full support of the Nigerian Federal government, this is regarded as a very safe investment in Nigeria.

7. Stocks: Although investing in stocks can be quite dangerous, it can also be very profitable. You can invest money in carefully researched equities if you have extra cash that you don't need right now. It's comparable to placing a successful business bet. You profit if the company increases in value.

8. Fixed deposit: Money can be invested in this way with confidence. You can fix large sums of money that you might not need for a while in a bank or other financial institution and earn big profits from doing so. Typically, the profit increases with the length of the money fixed. Simply go to a bank and request to start a fixed deposit account.

9. Technology: Over 76 million Nigerians use the internet. Numerous issues in Nigeria can be resolved with technology. There are numerous ways that technology can improve life. Build your own IT company or invest in others. Choose a challenge to overcome, and the future is yours. FinTech has recently gained popularity in Nigeria.

10. Cryptocurrency: The popularity of cryptocurrencies is rising everywhere, including Nigeria. You can invest in cryptocurrencies and get excellent profits for as low as N100. Several services make investing simple for you. You can launch a localised cryptocurrency trading platform if you have a sizable investment.

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