It is no longer news that we now spend higher to buy the same amount of goods or pay more than we used to for services. For everyday consumers, increased prices mean limiting any splurge spending to avoid a hit on your wallet, while those who invest are likely concerned about their money-losing value in the market.
Inflation is the general increase in the prices of goods and services. Inflation can be measured on a monthly or annual basis. Nigeria’s inflation rate for October is 15.99%. This means that between October last year and now, prices have gone up by 15.99%. Inflation may have fallen in recent months, but the overall price of goods remains relatively high without an equivalent increase in household income or assets. During this period, it is important to understand how to maintain the value of your money and stay ahead of inflation. Here are 4 ways you can do this.
1. Save in foreign currency (USD, Euro, Swiss Francs, etc.): As stated above, the purchasing power of Naira has an inverse relationship with the inflation rate. Experts are of the opinion that the problem persists due to the monolithic nature of the economy, inability to match up the gap difference between exportation and decrease importation, the ravaging insecurity threats are all factors that have led to the continuous devaluation of the naira thus, making Currencies such as Dollar a preferred store of Value than Naira. For example, a student saving towards a degree in the coming year may realize at the point of making payment that due to the difference in the exchange rate at the point of planning and execution, he/she may be thousands of Naira short of the amount required. This isn’t because of ill-planning or a biased forecast of the continuous devaluation of the naira, it is simply a risk not worth taking as this has been an established trend for years therefore, it is better to be safe than sorry.
2. Invest in assets like Gold and Real estate: Tangible assets such as Real Estate and commodities such as Gold are investment risk mitigators, investing in Gold and Real Estate are investment strategies. For both commodities, it may simply be buying land, property or Gold, or investing in a company that operates in either industry. Commodities and assets such as Real Estate are known to always hedge inflation as their value continually appreciates. For example, humans will continually need accommodation. For better rewards, it is particularly important to consider population growth analysis and evaluate potential strategic locations before investing.
3. Buy into mutual funds and Exchange Traded Funds (ETFs): as the name implies, mutual funds and ETF’s are a pool of funds from different investors which aims to give the capacity to buy bonds that one individual may not be able to purchase, and it is managed professionally. To beat the inflation rate, it is important to have returns above the rates and one way to do so is by investing in mutual funds which can offer higher rates, accumulated rates from the different stocks or bonds in a mutual fund give investors ROI’s that are above the inflation rate. It is also an investment that helps to mitigate risk.
4. Seek expert advice: Against the popular view that investment is only for HNI’S and so on, new investors or semi-new investors make investment decisions based on hearsays. Rather than make important decisions on a rational and sometimes, baseless basis, it is important to invest in quality education and quality advice to get quality investment. For first-time investors, doing so would help you to understand why you are investing, the type of investor you are, and what to invest in. And for old investors, seeking expert advice provides ground for quality information that has been properly researched therefore making credible investment options that are safe for you and your investment ultimately.