Did you know that a simple financial strategy can change your financial outcome? Well, that’s exactly what happened to me.
My Early Investment Journey
When I graduated, I had a job that was paying me very little. After transport and other expenses, I was able to save around 100,000 naira. I decided to invest in Nigeria’s treasury bills. Out of the 100,000 naira, my successful bid through my bank gave me 18,000 naira.
The Lesson I Learned
After receiving the 18,000 naira, I spent the money and waited all year long for the treasury bill to mature. At the end of the year, I got my 100,000 naira back. Now, I am wiser and understand the importance of compound interest.
Investing Wisely with Compound Interest
For instance, if I’m investing 3 million naira, the current CBN rate on their website gives a return of 20%. So, 20% of 3 million naira is about 600,000 naira. With this discount investment, I get 2.4 million naira and 600,000 naira to reinvest.
Reinvesting in Mutual Funds
I reinvest the 600,000 naira into a mutual fund. My risk appetite is low, so I choose a money market fund that currently stands at a bit above 18%. This way, the 600,000 naira grows at 18% per year. Despite fluctuations, you can expect around 15% in a worst-case scenario.
The Power of Compound Interest
By the end of the year, my investment of 3 million naira plus the interest earned from the mutual fund results in roughly 700,000 naira. Instead of just 600,000 naira, I now have 700,000 naira, demonstrating the power of compounding.
Alternative Investment Strategies
Alternatively, you can reinvest the 600,000 naira in the next treasury bill bidding cycle for another 20%, or roughly 18%. This way, the 600,000 naira grows again, adding to your wealth.
Start Small and Grow
Even if you don’t have a lot of money to invest, you can start small. For instance, with just 5,000 naira, you can create a debit order that directs the bank to invest 5,000 naira into your mutual fund account every month. By the end of the year, you’ll have 60,000 naira. Though it may seem small, it encourages you to invest more and grow your wealth.
The Joy of Passive Income
I love passive income because earning money while you sleep hits differently. If you haven’t tried it, I encourage you to start today. It’s a stepping stone to greater financial stability even with small amounts.
Get Started Today
So, what’s holding you back? If you have any questions, please comment below and I will respond. Thank you for watching, and I will see you again in my next video.
