Investment options in the midst of Covid-19

Hello Financial Experts,

What are the investment options available given the current Covid-19 pandemic?

Jude. A from Kano

Hello Jude,

In periods of heightened uncertainties, we recommend that investors remain cautions and position themselves to take advantage of investment opportunities in sectors with good fundamentals and growth prospects. Investors who currently have exposure to the equities market with a long-term investment  horizon must not feel pressured  to exit the market or worry about loss in their portfolios as a result of the decline in the equities market, however, they should expect significant upside as market conditions improve.

Please find below the following channels for investment opportunities below:

  • ARM’s Money Market Fund – An open-ended mutual fund with a highly liquid and low-risk profile that invests in high quality, short term Money Market Instruments;
  • ARM Eurobond Mutual Fund – A US dollar-denominated mutual fund that is authorized to invest in Eurobonds floated by the Federal Government of Nigeria and highly rated Nigerian corporates;
  • Eurobond investments– ARM Investment Managers offer investors access to invest directly in domestically issued Eurobonds; and
  • ARM Stocktrade– ARM’s proprietary mobile trading platform that provides access to trade domestic and international equities listed on the largest stock exchanges in the world.

How Offshore Stocks Are Doing

We hope you are keeping safe during this pandemic and observing all the safety procedures listed by the World Health Organization (WHO) and various public health authorities.

The coronavirus pandemic is taking a toll on the global economy and stock markets. While most companies’ shares are experiencing a dip, there are a handful of resilient stocks that are navigating this turbulent period better than others. here

As an investor, we hope you will take advantage of investing in these stocks. We also want to draw your attention to diversifying your portfolio by investing in offshore stocks. Here are some interesting names weathering the covid19 storm:

The online streaming giant, Netflix, has historically proven to be a formidable stock that can stand any tidal wave that may be putting some other giants on their knees. Recently, Netflix reported first-quarter earnings last week that showed a surge in demand for the service. The company reported that 15.7 million new customers signed up in the first three months of the year. This figure is higher than the 7 million users they projected for the year 2020. However, the impressive growth in subscription did not translate to an impressive bottom line owing to other charges that pressured profits. That said, Netflix stock has gained 30% so far this year.

In the same light, Microsoft reportedly recorded significant increase in the use of their services. As more people continue to work remotely, active users of the Microsoft Teams is said to have increased from 10 million last year to 44 million earlier in the month.Microsoft is expected to release result for the last quarter this week. The stock has gained 10% so far this year.

Like Microsoft, Zoom has become a household name since the pandemic started. Zoom’s stock has increased from $68 at the start of the year to $168 per share. Demand for Zoom is high during this new pandemic and it is a great add to your portfolio.

As the quest to find vaccines to the coronavirus pandemic increases, Gilead Sciences Inc, is one of the companies leading the trail. The pharmaceutical company is reputable for making HIV treatment drugs, and Ebola Virus vaccine, Remdesivir. The company’s stock has gained ~22% so far in 2020

These are only a few and we hope you will take advantage of these offshore stocks to diversify your investment portfolio. Start here

Download ARM Stocktrade App today and start trading both local and foreign stocks

What You Need to Know About InCap Solution

What You Need to Know About InCap Solution

What is The Incap Solution

The Incap Solution is a service which helps one plan for the “in-between” situations where temporary or permanent incapacitation prevents him/her from making personal medical or financial decisions. Incap Solutions employ the use of Medical and Financial Power of Attorney.

Why opt for the Incap Solution?

  • It gives one the advantage of having a trustworthy person or institution to take charge of financial and medical decisions in the event of an unexpected occurrence.
  • It ensures seamless continuance of one’s affairs in the event of incapacitation.
  • It helps prevent any form of loss that would otherwise be incurred as a result of one’s incapacitation.
  • It helps mitigate the risk of conflict between family members or employees.
  • It ensures that one is able to regain control of his/her assets upon recovery.
  • It provides the benefit of a clear-cut decision making by the Agent on behalf of the incapacitated person.

 How does the Incap Solution work:

  1. After completing the form, please return to ARM Trustees Limited.
  2. Your documents will be prepared for execution.
  • Afterwards, you’ll be required to sign your documents and return to ARM Trustees for Notarization, stamping or registration as may be necessary.

Download the Incap Solutions form here ARM Trustees – Medical & Financial Power of Attorney

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To keep dollars in cash or not?

Hello Financial Experts,

Since this pandemic and lock-down started, my wife and I have been advised by friends to hold on to the cash we have at hand especially dollars. Do you advise us to keep our dollars in cash?

Thanks.

Michael from Lagos

Dear Michael,

We won’t advise you to keep dollars in cash because you’ll be losing income that you could have earned if that cash was invested.

We encourage you to invest instead in dollar-denominated funds such as Eurobond Funds to protect against downside risk (devaluation of the naira).

In dire economic situations like we have today, we advise investors to take on a risk-off approach by investing in safe haven assets such as Money market funds and Government securities with some degree of cash to fund anticipated liabilities. The current economic climate faced in Nigeria has found several investors seeking to lower their exposure to the naira relative to the US dollar as the nation braces for increased currency uncertainty.

We hope we’ve been of help at this time.

Thank you.

Covid-19: Impact on the Financial Market

The events of the past quarter compounded by the global CoronaVirus (COVID-19) crisis and its massive impact on financial markets in the short to medium term brings a feeling of déjà vu. To reduce the spread of the virus, nations have restricted trade, travel, and in extreme cases closed their borders. Amidst all this, an oil price war between Saudi Arabia and Russia has pushed the price of crude oil below $35 per barrel.

These two factors have had an adverse impact on global economies; with governments around the world including the Nigerian government, responding with the introduction of stimulus packages to keep their economies from slipping into recession.

Despite any negative sentiments attached to current events, it is worthy of note that markets have a good record of overcoming global economic shocks as seen below:

  • In early 2003, a similar pandemic called “the Severe Acute Respiratory Syndrome” or (SARS) broke out in China and was not fully contained until eight months after the initial outbreak. However, the Chinese economy recovered and recorded a GDP growth of 10% in Q3 2003.
  • In 2015, Nigeria, like other global economies faced an economic crisis. The equity market declined 17% as global oil prices plunged to below $40 per barrel. However, investors who took a longer-term view during the crisis have fared better as markets have recovered from their lows.

The key takeaways:

  • The markets have a very good record of recovering from economic shocks.
  • We cannot time the market by consistently calling the bottom or the top, but we benefit most when we systematically invest over the long term. Market downturns provoke extreme reactions – sell late in a bear market or too early when the market turns – and this is not any different.

Way Forward for investors

From our experience, our conclusion is that it remains profitable to invest in financial markets with a long-term view.

The graph below shows the performance of the Nigerian Stock Exchange (NSE) All Share Index from 2010 to date. Whilst the asset class has under-performed over short periods, we caution investors not to write off this asset class as the volatility creates opportunities for strong positive performance over the long-term. Investors have also profited by applying rigorous research in stock selection and by maintaining a disciplined investment process. Similarly, investing in fixed income securities over the medium term has provided a good hedge against inflation as the Federal Government securities over the last 5 years delivered average annual returns of 19%, well in excess of inflation.

For investors with an above average risk appetite, there are opportunities in specific sectors of the economy such as Telecoms, where companies earning capacity will not be significantly impacted by current events, and Consumer Goods where there are companies that have the ability to withstand market shocks. Furthermore, asset prices have declined significantly to record low levels, creating compelling entry prices as new year lows are redefined. Dividend yields remain attractive across a number of companies that have maintained strong fundamentals. (e.g. Tier-1 banking names such Zenith Bank and Guaranty Trust Bank).

For investors with lower risk appetite, we would advise on a re-allocation from risky assets to money market- based investments (such ARM Money Market Fund) because of their potential for steady and competitive returns in the short term.

Final words

Although we should expect substantial market volatility in the short term, investors who are able to maintain discipline and take a longer-term horizon to investing would make it through the down cycle to enjoy the benefits of an inevitable rebound.

Our customer experience team is available to guide you through appropriate investment decisions suitable to your need. We remain focused on navigating the market environment, with the aim to keep your investment on track toward reaching your long-term investment goals.

Please maintain all the rules of safety in this period, we wish you good health.

Tough Times don’t Last, But Tough People do…

Are you an investor trying to keep your head above the waters of this economy?

Our smart investment tips are designed to help you make sound investment decisions in this tough economic clime. Please see below;

  1. Borrow less

Think twice about taking on more debt, focus on business opportunities that do not require more capital than you can afford.

  1. Learn Something New

There just might be a more rewarding way to go about your business. Make it a goal to learn something. For instance, you might want to look up the difference between mutual funds and bonds.

  1. Master your emotions

Don’t make your most important decisions under duress. Think about it again and again, be sure it is the wise financial move to make.

  1. Diversify your investments

Spread your risk by investing in different asset classes (equities, property, commodities, bonds and cash)

  1. Reduce operational costs

Reduce your overhead as much as possible. A good way to do this is to consolidate your brokerage accounts so you can negotiate lower management fee.

  1. Get quality Financial advice

Be careful who you are listening to and from whom you are getting investment advice. Get informed quality financial advice from ARM Securities.

  1. Create multiple streams of income

Scarcity and inflation are opportunities in disguise, find that thing you can exchange for value or engage in a passive investment such as a Money Market Fund.

  1. Avoid volatile sectors

A good risk appetite might not favour you at a time like this. Channel your resources to sectors that deal in goods and services that cater to necessities of living.

  1. Build strong relationships

Build relationships that ensure you are in a network of people who challenge your thinking and provide a well of valuable information from which you can tap.

  1. Have an emergency fund

It is important to stay liquid at a time like this. Do not invest all your money, leave something to fall back on.

  1. Invest in income producing assets

This is a good time to build a dividend portfolio. However, not all assets are income producing. Contact ARM Securities for tips on how to build a profitable portfolio.

  1. Creatively solve problems

Not all challenges require money to solve them. Look within before you look without, there just might be an efficient but less expensive way to solve that problem.

Do you require expert financial advice or would like to know more about our investment portfolio management and stockbroking services, talk to us today.

Financial Planning with Raphael: Considering Foreign Currency As An Investment

The Coronavirus pandemic has had an adverse effect on major economies worldwide. As countries have closed their borders and restricted non-essential travel, this development has led to an impactful decrease in the global demand for crude oil and, subsequently, a correlating fall in crude oil prices. Furthermore, an ongoing oil price war led by Saudi Arabia and Russia has resulted in historic increases in unwelcome supply and a further catalyst of the decline in oil prices.

With the bulk of Nigeria’s foreign reserves stemming from the exportation of crude oil, the global decline in oil prices has strongly affected confidence in the country’s economy and currency. The flight-to-safety phenomenon has led foreign portfolio investors to exit their investments in the Nigerian – a move which has led to the depletion in Nigeria’s already precarious foreign reserves. In February 2020, Nigeria’s FX reserves declined to $36.36 billion, a 4.5% decline from the reserves’ January position at $38.1 billion.

Consequently, in the past few weeks, there has been substantial demand in the US Dollar as investors have sought to convert their Naira savings as a hedge for the growing expectation that there will be a deep devaluation of the Naira, even amidst the CBN’s denials that there are no plans for a devaluation.

However, on March 20th, 2020, as a result of steep declines in crude oil prices, the CBN issued a circular which effectively established a convergence of the multiple exchange rates for the naira. Nigeria will now observe a single exchange rate for all transactions. At both the Bureau De Change and Import & Export Window (I&E), the new end-user price has moved from N366.7 / $1 to N380.2 / $1. The CBN said that the decision to peg the exchange rate of the naira at N380 / $1 is not a devaluation of the currency but, rather, an adjustment of the rate. However, many still believe that a further devaluation is to be expected.

Amidst the turmoil and panic, the following questions must be considered:

  • What if there is no further devaluation of the Naira?
  • What happens if the pandemic is resolved sooner than later?
  • What will happen if the oil price war ceases and oil prices rise back up?

Unfortunately, these questions can only be answered with certainty in hindsight. However, the savvy investor must ensure that, regardless of the outcome, their savings remain protected and unsystematic risks remain low. Following the Financial Planning Principle for the effective management of your funds, investments in foreign currencies should be strongly considered for the following reasons:

  1. Diversification of the potential risks associated with solely holding the Naira currency
  2. Current and future Dollar-denominated obligations
  3. Hedge as a means of protection against the depreciation or devaluation of the Naira

Opportunities to look into

In achieving the objectives above while gaining competitive returns, kindly see below the following opportunities for investment:

  • ARM Eurobond Mutual Fund – A US dollar-denominated mutual fund that is authorized to invest in Eurobonds floated by the Federal Government of Nigeria and highly rated Nigerian corporates;
  • Eurobond investments– ARM Investment Managers offer investors access to invest directly in domestically issued Eurobonds; and
  • ARM Stocktrade– ARM’s proprietary mobile trading platform that provides access to trade domestic and international equities listed on the largest stock exchanges in the world.

6 books to read on money and investing during the quarantine

Life as you know it has been paused due to the current Corona Virus pandemic. You, like many others, have been confined to your home with limited movement for the next couple of weeks; but how do you spend this time wisely?

We recommend reading!

Here are some books on personal finance and investment you should read while at home to help you manage your finances better.

The Intelligent Investor by Benjamin Graham

Referred to as the godfather of investing, Benjamin Graham takes a different approach to investing in this book which we’re sure you’ll enjoy. Warren Buffet calls this “the best book on investing you’ll ever read”.

 

A Random Walk Down Wall Street by Burton Malkiel

This is a good one for beginners as Malkiel includes handy definitions of investment terms as it applies to various investment strategies directed toward different stages in life. In this book, he lays emphasis on long-term investments rather than get-rich-quick schemes including how to avoid common mistakes.

Thinking, Fast and Slow by Daniel Kahneman

This book isn’t just about investment. This Psychology professor delves into how one’s thought processes can affect investment success. Within the book, Kahneman explains how to identify your biases and lock them out so as to make rational, clear and analytical investment decisions.

Your Money or Your Life by Vicki Robin

This book is what you need to learn the art of living within your means by changing your habits and enjoying life. It helps you understand how to deal with this thing called ‘Budgeting’.

Rich Dad, Poor Dad by Robert Kiyosaki

‘Rich Dad Poor Dad: What the Rich teach their kids about money that the poor and middle class do not’ is touted as one of the bestselling personal finance books ever.

In this book, Kiyosaki uses his childhood recollections of his not-so-wealthy father and the father of his friend who was one of the richest residents in Hawaii to drive home points about money. The comparison shows how best to manage your money or lack of it, as well as helping your kids to do the same. Kiyosaki in this book posits that not all debt is bad, and you can build wealth even if you don’t currently have a staggering income.

The Broke Millennial by Erin Lowry

This book offers a fun, relatable take on managing money for beginners. Targeted towards 20-30-somethings who want to learn about finances, Lowry covers tricky, real-life situations involving money and how to deal with the challenges of having or not having enough brings.

Explore the pages of these select books to build your money-management and investing knowledge and then go on to explore www.arminvestmentcenter.com to put what you’ve learnt to practice with a plethora of investment vehicles to suit your every need.

ASK SHADE: My siblings are not happy I adopted a child

ASK SHADE: My siblings are not happy I adopted a child

Dear Shade,

I just turned 50 and decided to adopt a child since I never got married nor have a child. This 3-day-old baby is God’s gift to me and while I want to be around for a long time to see her go to the university and even get married, I know I cannot guarantee it. I’m not a prophet of doom but as a realist, I want to take measures to secure her future mainly because my other two siblings and their children have greatly benefitted from me financially and they didn’t seem happy when I adopted a child. 

Thank you.

Ayomide from Akure

 

Dear Ayomide,

Happy belated birthday and congratulations on your bundle of joy.

Your desire to secure your daughter’s future is applaudable and very responsible as people usually ignore the need to do so. They are either distracted by their day to day activities or are simply in self-denial of the fact that we are all mortals. Also, the fact that your siblings and their children sometimes financially depend on you is the more reason why you should take steps to secure your child’s future.

To efficiently and effectively secure your daughter’s future, you would require a structure that would ensure minimal exposure to any dispute arising from your extended family, considering their reception to your decision to adopt your daughter. Setting up a Trust could be a good beginning because it affords you the ability to make provisions for your daughter by transferring your assets to a neutral, unbiased third party known as a Trustee and name specific beneficiaries who would benefit from the Trust. This ensures the protection of your assets as they would only be made available to the named beneficiary or beneficiaries upon eventuality.

Other estate planning devices such as the Easy Will may also be drafted to complement the Trust. The Will may be necessary to transfer or dispose of your personal assets such as your bank accounts, pension, pieces of jewelry and personal belongings.

I felicitate with you once again Ayomide and wish you the very best in your endeavors.

Cheers,

‘Shade

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January Inflation: CPI maintained upward trajectory

As anticipated, inflation for the month of January ascended by 15bps to 12.13% YoY (vs December: 11.98% YoY) and 4bps shy of our estimate of 12.09% YoY. In our monthly economic update, we highlighted that the low base from food prices would send inflation on an upward trajectory. Unsurprisingly, food inflation rose 18bps to 14.85% YoY, accounting for bulk of the uptick in headline inflation, while core inflation moderately expanded by 3bps to 9.35% YoY. On the former, the pickup was anchored by 29bps and 6bps increase in farm produce and imported food to 15.35% YoY and 16.10% YoY respectively. Nonetheless, the buoyant supply from main harvest season has helped in moderating the pace of increase. Also, Core inflation ticked up by 3bps to 9.35% YoY, reflecting increases in HWEGF (+8bps to 7.78%), Transport (+10bps to 9.35% YoY), Health (+19bps to 9.78% YoY) amongst others.

Following similar trend, Month-on-month numbers rose slightly by 2bps to 0.87% MoM (3bps shy of our estimate: 0.84% MoM) due to minute expansion in both core and food inflation. Food inflation ticked up 1bp to 0.99% MoM mirroring 2bps expansion to 0.93% MoM in farm produce. Similarly, core inflation rose 1bp to 0.82% MoM following increases in HWEGF, Health, Transport, Clothing, Education.

We retain our view for an expanse in headline inflation owing to two key factors. First is the lingering impact of the low base on food inflation. Secondly, the increase in VAT from 5% to 7.5% which took effect from 1st of February 2020 with the aim of the generating more revenues for the government is expected filter into inflation numbers. Consequently, we expect the northward trend to persist, with headline inflation for the month of February printing at 12.3% YoY and 0.88% MoM. Against this backdrop, we expect average inflation for 2020 to print at 13.0% (FY 19: 11.4%).

Figure 1: One-year trend in Inflation rate

Source: NBS, ARM Research