What you must consider before Investing Online in Nigeria

The trend of online investment has been catching up around the world since the introduction of the internet, this has contributed to the growth of trading figures worldwide.

Likewise, here in Nigeria, online trading and investing have been continuously booming for the last two decades, which can be witnessed by a continuous surge in the average daily trading volume in the capital markets. This has encouraged growth of local investing & fintech sector with the launch of local investing apps like Chaka, Wealth.ng, which have received multi-million-dollar investments to cater to this market.

Online investing platforms and apps have enabled Nigerian investors to have ease of access to the financial markets worldwide, online trading tools have helped reduced the time & effort involved in market analysis and order execution; which has helped many investors take timely market opportunities.

However, for an uneducated or beginner investor, investing in financial instruments or capital markets can be highly risky. This risk increases ever more when they are doing it online as it puts them at risk of scams & frauds.

Investors need to take care of certain factors before exploring the online investment opportunities for their safety & security.

Most of the new investors fail to achieve their financial targets or face drastic outcomes as they lack guidance and experience of trading & investing.

Following are the points which must be considered by every individual in Nigeria before investing online.

7 Factors to Consider while Investing Online

  1. Start with a Financial Plan & Realistic Target

Investing without a plan or without setting an objective is similar to searching for a treasure without a map. We cannot achieve our target if we don’t know the destination or lack the discipline to achieve it.

New investors should make a well-defined financial plan before investing online. The ideal financial plan should take care of the monthly expenses and liabilities along with a separate allocation for an emergency fund.

You must prepare a budget to check how you can keep aside funds or save funds from your income for investing after fulfilling all your liabilities.

For this, you need to start saving early. If we do not save from what we earn, we can never grow our earnings in the future.

Famous investor Warren Buffet says – “Do not save what is left after spending, but spend what is left after saving”.

The financial targets should be realistic and achievable after considering the volatility and inflation in the market. No one can become rich like famous billionaires Jeff Bezos or Aliko Dangote in a week or a month. It requires planning, discipline and consistency.

Your financial investment plan should be made according to your objectives and your risk appetite. Discipline and persistence can play a major role in turning your monthly savings into wealth.

A monthly investment of N5000 at an annual compound interest rate of 15% can nearly become N1.2 million in 10 years and more than N6.2 million in 20 years.

  1. Check all the Available Investment Options & Financial Instruments

The online mode of investment has brought a variety of financial instruments to our fingertips. This does not mean that we should choose the one that supposedly pays the best returns on paper.

Each financial instrument has different pros & cons, and involves different magnitude of risk factors. Investors must be insightful enough to choose the financial instruments that are best suited for oneself according to financial literacy and risk appetite.

According to ForexTrading.ng, “Beginners should start with less risky and less complex financial instruments like saving or recurring deposit accounts, mutual funds, etc. It is important to know about the potential returns, but even more important to be aware of the risk factors involved in the financial instrument before investing in it, to make a better plan and achieve the goal.”

Generally, the financial instruments that deliver higher returns involve higher risk, while the ones that have low risk factor offer lower returns. Stocks, Bitcoin, Forex involve much higher risk but they have the ability to provide higher returns.

The risk and returns go hand in hand in the world of investments.

However, investors should always seek for the instruments that can deliver better returns at lower risk to achieve the financial objective.

  1. Learn About the Financial Market and the Basics of Investing

Before any making investment, it is important that you invest your time in the education and research of the financial markets, instruments, and basics of investing.


The financial instrument that you have chosen must be analyzed profoundly to get an idea of the possible returns and all the involved risk elements.

The investor must know what factors throughout the world can affect the financial markets or the chosen instruments. The knowledge of factors affecting the chosen financial market/instrument can allow the investors to make better investment decisions at the right time to make higher profits or to avoid losses.

Investors should also possess knowledge of the terminologies and available tools & features that can help with their trading positions like margin, stop loss, etc.

Suppose, if you have decided to invest in a mutual fund, you should know about the types of funds available in Nigeria and the best performing mutual funds. Before investing in any of the mutual funds, it is important to know where the fund manager is investing and his track record in the past. Investors should be able to identify whether the fund is suitable for their investment objective or not.

  1. Consider and Manage the Risk Factor

Each financial instrument carries multiple types of risks. A successful investor must be able to identify each and every risk element and should try to mitigate them to the lowest levels. The risk should be evaluated thoroughly – constituting the market risk, leverage risk, liquidity risk, credit risk, inflation risk, and various other types.

Every investor must be aware of the risk threshold that can be tolerated and the maximum amount of investment one can lose. The ability to identify the risk factors of an instrument and knowing one’s capacity to take the risk as an investor, can make the selection of investment instruments easier.

Analysis of the potential risk elements can play a vital role in reaching the financial objective and avoiding unwanted outcomes.

Each identifiable risk factor can be mitigated to the lowest levels by taking concerning steps and applying risk management strategies. Investors should carefully examine the risk to reward ratio and opt for the most productive instrument at the expense of a suitable risk factor.

If the chosen financial instrument involves a higher risk, the investors should limit the losses by avoiding to invest more than one is willing to lose, or consider diversification or allocation of funds across different instruments.

  1. Choose the Best Suited Trading/Investing Apps

Choosing the investment application or online broker is one of the most important parts of online investment. There are lot of scams & frauds that are happening in online investing that you need to avoid – by choosing a reliable or trusted trading app.

A trading or investment application must be chosen wisely after checking its reputation, history, features, fees, tools, instruments available, safety, customer service, and various other aspects.

The app or broker must be regulated by the instrument’s concerned regulatory authority. Investors must spend time and effort to check and compare the available trading applications to choose the most suitable broker for oneself.

Some brokers offer multiple financial instruments to invest while many are specifically chosen for particular instruments due to specialization. Following are the commonly chosen investment applications in Nigeria for various instruments.

  • Forex & CFDs: Online Forex trading and Forex brokers are not yet regulated by any regulatory authority of Nigerian jurisdiction. Most of the brokers offering forex and CFD trading services in Nigeria are based in foreign jurisdictions and are regulated by foreign regulatory authorities. For their safety and security, traders must ensure that their broker is regulated by a foreign top tier regulatory authority like FCA of UK or ASIC of Australia. Some of the top tier/FCA regulated forex brokers that accept Nigerian clients include ForexTime, Hotforex, Plus500, etc.

Forex and CFDs are complex capital market instruments and involve significant risk which is not suited to most investors. Traders and investors must only invest in FX after learning the basics, terminologies, strategies, features and gaining appropriate experience. Beginners should trade with a demo account to gain experience before making actual trades.

  • Foreign and Nigerian Stocks:The stock market investments in Nigeria are regulated by the Nigerian Stock Exchange (NSE), Security & Exchange Commission (SEC). Every broker offering – stock brokerage & investment needs to be licensed by NSE & SEC. While investing in foreign stocks must only be done through brokers regulated in the relevant jurisdiction like – SEC, FINRA for US stocks.

Stock trading or investment can be risky but keeping a track of the market, research, and analysis along with disciplined investing can give you returns in the long term.

To start stock investment in Nigeria, potential investors should look out for NSE registered brokers or online investing platforms like Piggyvest, Bamboo, Wealth.ng, Chaka, Rise etc.

  • Bitcoin & Cryptocurrencies: These are the high-risk financial instruments that are currently not regulated in Nigeria. The price movement can be sudden and can occur at any time due to any economic or political reason that affects its supply & demand. Traders and investors with very high-risk appetite can either directly buy and sell cryptocurrencies or can speculate the price movement through CFDs on cryptocurrencies. Popular trading platform offering cryptocurrency trading in Nigeria are Luno, Paxful, etc.
  • Mutual Funds or Unit Trusts: This is the ideal investment instrument for beginner investors. A pooled sum of money from various investors is allocated in multiple instruments by the fund manager. Different mutual funds have different objectives and risk factors. But it is important to check that the fund is regulated & approved by financial regulators like SEC.

A fund manager must register themselves with SEC Nigeria, and currently there are around 125 registered fund/portfolio managers. Many mutual funds are now also listed on NSE’s ETF index. There are also some online platforms like Cowrywise that allow investing in different mutual funds.

  1. Diversify your Investment for Long Term

Investing the whole amount in one single financial instrument can increase the risk factor. The volatility in price movement of any financial instrument can be controlled and mitigated by diversifying the invested amount. Diversification is considered one of the most important risk management techniques as it helps to reduce the risk associated with individual instruments.

The division of the invested amount can be done according to the risk and return preference of the investors. In worst cases, if any of the instruments deliver unwanted outcomes, it can be neutralized if the other elements in the portfolio are performing well.

  1. Monitor Portfolio Regularly

Regular monitoring of the investment portfolio is important and can be crucial in garnering consistent gains from the portfolio.

Some instruments perform well for a certain period and through regular monitoring and updating, investors can add better performing elements and remove the ones that are pulling down the portfolio returns.