how to invest in mutual funds in nigeria

How to Invest In Mutual Funds In Nigeria

Nigerian Investors are beginning to leverage more on mutual funds. If this seems vague to you, you’ll find everything about how to invest in mutual funds in Nigeria and the benefits of such investments in this article. This will help you achieve your investment goals

So, let’s dive in.

What Are Mutual Funds?

A mutual fund is a carefully managed investment fund that requires investors to pool funds together towards acquiring securities. These investors might be institutional or retail in nature.

In another simpler way, we can think of mutual funds as a group of people standing around an empty box. Then each of them drops N1000 cash in the empty box. They would be said to have just mutually funded the box, so that’s mutual funds!

So, the fund managers get funding from different investors to acquire diversified investments such as securities, bonds, and agricultural produce. In most cases, an outline of where your money is going is often revealed in the investment catalogue. And the profit made from such investments is shared among investors as specified in the mutual fund plan or scheme.


Mutual Funds Are Easily Accessible

As an investor, you can easily acquire mutual funds from brokerage firms, investment firms, mutual fund companies, insurance companies, asset management institutions, and investment departments of banks.

The ease of buying mutual funds applies both to experienced and newbie investors.

Mutual Funds Are Simple

While there are quite some things you must know about mutual funding, they are however very easy to comprehend, especially when you compare them to other investment products.

Related:  22 Ways to Improve Cash Flow in Business

Besides, you do not necessarily have to know the core details of the system since they are generally often managed by experienced and skilled managers.

It Requires Low Cost Of Management

Mutual funds aren’t demanding like other types of investment portfolio. You can invest as low as N20,000 without facing any extra cost for management and any hidden charge, and still get a quarterly return on investments of 15%.


Mutual funds provide liquidity to an investor. Liquidity refers to how easy it is to convert an investment into money by having them sold.


Equity Funds

These mutual funds have speedy growth compared to some others and focus on stocks. However, there is a high risk of an investor losing money. Types of equity funds include large cap funds, mid-cap funds, small-cap funds, balanced funds, sector mutual funds, equity linked savings schemes, and index funds. You may also want to combine them.

Money Market Funds

Money market funds have lower returns compared to some others, but they are safer. They focus on short-term fixed income securities such as treasury bills, government bonds, certificates of deposit, bankers’ acceptances, and commercial paper.

Balanced Funds

Balanced funds invest in a mix of fixed income securities and equities. The goal is mainly to balance acquiring high returns against losing investments. They appear to be less risky than pure equity funds, but riskier than fixed-income funds.

Fixed Income Funds

These type targets generating regular funds through interest from earning. The funds acquire investments that pay a stipulated rate on returns like high-yield corporate bonds, government bonds, and investment-grade corporate bonds.

Fund of Funds

These have a look-alike of balanced funds. The funds invest in other funds and try to make room for easy allocation of assets and diversification for investors. Unlike stand-alone mutual funds, the MER for fund-of-funds is higher.

Related:  Starting A Small Business Checklist

Index Funds

Index funds sort of have lower costs than mutual funds that are actively managed since the manager doesn’t have to do so much as regards research and making investment decisions. The mutual funds are often determined by the index – they go up if the index goes up. The funds focus on tracking how a specific index performs.

Specialty Funds

This kind of fund emphasises more on specialized mandates such as commodities, real estate, or socially responsible investing. For instance, investments can be made in companies that provide support in diversity, human rights, and environmental stewardship by a socially responsible fund, while circumventing companies that are involved in stuff such as weapons, alcohol, gambling, and tobacco.


But then, there are some things you must consider when selecting a mutual fund to invest in. They are given below:

1. The Type Of Fund

You should be able to make your decision on what type of fund you are going for and considering all the factors that could influence outcomes.

Choose whether you’ll be going for income funds, equity funds, balanced funds, and others. The investment option you choose will decide how you grow your income, your regular earnings, and safety.

Also, you should be able to find out what type of funds the investment/fund manager is putting your money on. This is pretty easy with some mutual funds app like cowrywise, although it leans more towards savings but it is still a very good app for investment.

2. Past Performances

Consider checking the past performances of the available funds to be able to stream down on your specific choice of funds. Although this may not present you with an idea of what the future holds for such investment, past trends at times is a good measure.

Take for instance, Manchester United during the reign of Sir Alex Ferguson, they were among the Epl clubs to dominate for years, therefore predicting them to be in the top 3 was a very good risk to take. By making the top 4, they are always in the Champions League which means more funds. Such can also be applied when choosing your next project.

Related:  How to sell on eBay fast

3. Minimum Investment Of Funds

It is important that you put the minimum investment into consideration. Your financial capacity will decide which one you choose.

While some may require just N5,000, others may be as high as N200,000. So, you really need to consider your financial capacity, and the result you want to get with it. However, understand that the amount you invested will determine your level of risks and rewards.

4. Know More About The Fund Manager

Find out what kind of reputation and pedigree the considered investment company already has in the market. What has been the performance of their funds in relation to others?

Ensure not to be pressured into making your decision, and find out every necessary detail about them including how much they charge.

5. Consider Your Level Of Risk Acceptance

Funds have different levels of risks, so it is important that aside from finding funds that generate good returns, also consider if risks involved are within your capacity or level of risk acceptance.


Investing in mutual funds is quite simple. You reach out to your ideal fund manager and receive your forms via email. Fill the forms, and return them with your cheque. Simple!

A few hours later, your investment will begin to run. You may also want to harness the Fund manager’s website to peruse the investment process of your preferred funds.
Institutions such as Cowrywise, Stanbic IBTC, First Bank of Nigeria, Vetica, Investment One, United Capital PLC, and many others allow you to acquire mutual funds in Nigeria

Your returns will depend on how much you invested in the said project. For instance, if you invested one million naira, and the project promises a 17.5% return annually, then you have made an extra NGN175,000 which is quite okay considering its low-risk nature. Funds managers charge between 2 to 5% of the entire portfolio. Do note that mutual funds are tax-deductible.

To start investing in mutual funds, you should have at least N5,000. Still, some companies may request a deposit of N100,000 or N1,000,000. Investors should be aware that investment in mutual funds does not necessarily mean investing in one instrument as they can be put in treasury bills, bonds, stocks, and more as we have already stated.

Leave a Reply


You cannot copy content of this page