Here is why you should invest in foreign markets.
Currency fluctuation
In making medium to long term investment, investors typically weigh in the stability of the investing currency. This is because if the investing currency is constantly being devalued or affected by high inflation, then no matter the returns you’re earning on them, your investments are probably losing, rather than gaining value. The best way to mitigate this risk, therefore, is to save, invest and earn your returns, in a foreign currency or foreign markets.
It is no news that the naira has been on a devaluation run and operating in multiple exchange rates. As at July 10th, the official naira to dollar exchange rate had been devalued to NGN360/$1. On the same day, the NAFEX I&E rate closed at NGN387/$1 while the parallel market otherwise called “Black Market” closed at NGN467/$1.
The CBN is expected to fully unify the exchange rates across all markets. Market analyst expect further depreciation of the naira if the CBN goes through with its unification plan.
Taking your investment from a high risk, devaluing currency to a stable and appreciating currency does seem like a bad choice.
Increased options
Investing outside of the Nigeria provides a much greater choice of companies and opportunities. While information may be harder to come by and companies more challenging to assess, the potential reward can be much greater.
Diversification
Beyond just having your investments in foreign currency, you should consider adding foreign investments to your portfolio. This allows you to not just invest in an appreciating currency but also invest in assets that are completely immune from local economic shocks and tap into larger, faster-growing economies where you can make more in the long run.
With technology, it has become easier to invest in foreign portfolio from anywhere in the world. There are platforms in Nigeria that can enable you make foreign investment from the comfort of your bed.
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