A Comprehensive Guide to the Best Mutual Funds in Nigeria

Investing in mutual funds is an emerging option for Nigerians who want to save and grow their wealth, as well as contribute towards financial security. Given the right mutual fund, an investor could enjoy professional management, majority diversification as well as comparatively lower risk compared to directly investing in stocks. The only problem is, we have so many mutual funds in Nigeria that selecting the best one can be quite challenging. This guide is an attempt to simplify the process by giving you a list of top mutual funds in Nigeria based on their performances, risks as well as assets under management. 

Understanding Mutual Funds 

Before we jump into the best mutual funds in Nigeria 2020, let's first understand what a Mutual Fund is and how it works. A mutual fund pools the money of some investors to buy shares in securities such as stocks, bonds, and other assets. A Mutual fund is managed by experienced and professional Fund managers who decide the appropriate investment they needed to make based on objectives of a mutual fund. 

Here are some of the advantages you get with mutual funds: 

1. Diversification Mutual funds invest in many securities; so if one does poorly, the impact on your portfolio is minimized. 

2. Seasoned fund managers will manage the investments professionally thereby making informed decisions based on research and market study. 

3. Minimum investment required Investment in mutual funds requires a small amount of money A substantial sum is needed to get started on stock markets Accessibility Anyone with little or modest income can invest and start making profits only after some time The rich get richer as they keep the high bar even higher since very few people fulfill it Risk Mitigation Low risk given that 35% loss at one stake will not have much effect if other portions are profitable Can lead an individual straight into bankruptcy if something goes wrong et all variables go haywire (stock price crash, recession hits dang hold balance) Objective Investments means maximizing wealth over an extended period while avoiding any losses Short term profit-maximization instead. 

4. Liquidity: With the great majority of mutual funds, you will have no problem selling or redeeming your shares at their NAV. 

Relationship between mutual funds in Nigeria and unit trust

But with many mutual funds in the market, choosing one suitable for your requirements can be a daunting task. A few other big things to remember: 

1. Investment Objectives: 

Mutual funds have different objectives which can include growth, income, or capital preservation. Knowing what you are trying to achieve financially will help you pick a fund that is right for your goals. 

2. Risk Tolerance: 

Every mutual fund comes with a different risk level. Equity funds, for instance, are generally more risky but can offer higher returns whereas bond funds have lower risk with perhaps lesser return. Your fund selection will be driven by your risk tolerance. 

3. Fund Performance: 

Looking at a fund´s performance record can shine some light on the returns to come. Of course, past performance is no indication of future results. 

4. Expense Ratio: 

This is also called the expense ratio, funds are charged as annual fees and operation costs. Watch Expense Ratios Lower expense ratios mean more of your money is working for you; try to compare costs across funds. 

5. Fund Manager’s Reputation: 

How a Mutual Fund Performs Is Heavily Influenced by the Expertise and Performance History of the Fund Manager Typically, capital managed by more experienced and reputable fund managers is backed with a great deal of credibility. 

Different mutual funds come with different minimum investment requirements. The point is to choose a fund that makes sense given your budget. 

Top Mutual Funds in Nigeria 

So with all that out of the place, let's look into some of the top mutual funds in Nigeria to invest. From performance, management, and alignment to many investment goals, this list is compiled. 

1. How To Apply for Stanbic IBTC Nigerian Equity Fund 

- Fund Objective: Growth 

- Risk Level: High 

- Minimum Investment: ₦5,000 

Expense Ratio: ~1.5% 

Stanbic IBTC Nigerian Equity Fund: The Stanbic IBTC Nigerian Equity Fund is one of the largest and most established equity funds in Nigeria. It seeks to achieve long-term capital appreciation by investing in a portfolio of Nigerian stocks. It is a great fund for investors with higher risk tolerance seeking long-term high growth. The fund has a track record of good performance as it usually outperforms the NSE ASI. 

2. ARM Aggressive Growth Fund 

Fund Objective: Aggressive Growth 

- Risk Level: High 

- Minimum Investment: ₦10,000 

Expense Ratio Around 2% 

Objective: The ARM Aggressive Growth Fund aims to deliver maximum long-term capital appreciation by investing in a diversified pool of equities, fixed-income securities, and other financial assets. This fund is clearly not for those who are risk averse and very suitable for investors with an appetite for higher risk to get some high rewards. The fund is more aggressive in its approach & aims for long-term growth, which works well for investors having a wider investment time frame. 

3. FBN Money Market Fund 

- Fund Objective: Income 

- Risk Level: Low 

- Minimum Investment: ₦5,000 

Expense Ratio: Around 1% 

FBN Money Market Fund offers a low-risk mutual fund that is designed to provide regular income and preserve capital. The Fund is primarily invested in short-term, high-quality money market instruments like Treasury Bills and Fixed Deposits. This fund is great for the risk-averse looking to keep their money safe but earns a little bit on it. Moreover, it provides instant liquidity capabilities so that investors can use their funds easily. 

4. United Capital Balanced Fund 

– Fund Objectives: Balanced Growth and Income. 

- Risk Level: Moderate 

- Minimum Investment: ₦10,000 

Expense Ratio: About 1.5% 

For the second time, the United Capital Balanced Fund is created for those who require a combination of growth and income in mind. The fund invests in a unit-linked sub-fund. The latter has a diverse investment portfolio featuring equities, bonds, and money market instruments. Considering the above, I believe that this is a good moderate-risk fund for an investor who does not like too much volatility but, would still expect decent returns. It is a great option for those seeking capital appreciation and income growth. 

5. Stanbic IBTC Ethical Fund 

Fund Objective: Growth with Ethics 

- Risk Level: Moderate 

- Minimum Investment: ₦5,000 

- Expenditure Proportion: C. 1.8% 

The Stanbic IBTC Ethical Fund is a different type of fund as it adopts, the ethical investing principle by shunning investments in companies with the production of products considered harmful to society such as alcohol, tobacco, and gambling. REREX is an ideal choice for socially responsible investors who seek to grow their profits while sticking with their moral beliefs. The fund invests in companies, mostly equity-oriented with a preference for good corporate governance and social compliance. 

6. Coronation Fixed Income Fund 

- Objectives: Income and capital preservation. 

- Risk Level: Low to Moderate 

- Minimum Investment: ₦10,000 

Expense Ratio 1.2% (approx.) 

Dedicated to providing steady income while maintaining capital, the Coronation Fixed Income Fund. They primarily invest in a combination of government and corporate bonds, and other money market instruments. This fund may be appropriate for the more conservative investor looking to generate income with a smaller risk profile, or those close to retirement. 

7. AXA Equity Income Fund  

Fund Objective: Growth and Income 

- Risk Level: High 

- Minimum Investment: ₦5,000 

– Expense Ratio: Around 2% 

Who is the AXA Mansard Equity Income Fund for? The fund holds a blend of stocks and fixed-income securities but mainly looks to produce dividend income through its equity holdings. This fund is ideal for high-risk investors who want to bang the ball out of the park. Balancing equities with income-producing assets plays a key role in the fund's strategy, making it suitable for long-term investors. 

8. Zenith Income Fund 

- Fund Objective: Income 

- Risk Level: Low 

- Minimum Investment: ₦5,000 

- Expense Ratio: ≈ 1% 

A low to moderate-risk mutual fund seeking to provide a regular income through investments in high-quality fixed-income securities (such as government bonds, corporate bonds, and money market instruments). It suits conservative investors, who want predictable returns without putting the capital at big risk. The fund maintains a conservative investment strategy making it an attractive choice for investors seeking to protect and preserve their wealth with regular income from fixed-interest distributions. 

How To Buy Mutual Funds in Nigeria 

Part of the reason why mutual funds are popular is that they can be accessed quite easily in Nigeria. Let me show you how to do that. 

1. Decide on Why to Create: 

As with any investment, it is important to define what your financial goals are and be clear on your risk appetite before investing. This will help you in selecting the accurate mutual fund according to your purpose. 

2. Research and Compare Funds: 

These may include the mutual fund objectives, performance history and maximum drawdowns (volatility), risk levels (usually defined by volatility or beta numbers), expenses in terms of expense ratios paid out to their respective asset management companies (not sure if that's allowed for indexing) lastly who is actually managing your money. Knowing this will help you eliminate those funds and pick the most suitable fund. 

3. Opening of an Account with a Fund Manager: 

To invest in a mutual fund you will need to open an investment account with the company that manages it or within an establishment where they offer this product. Step 3 requires completing a form and uploading your identification documents. 

4. Make Your Initial Investment: 

After you already have the account, just make use of it to transfer money before performing your first investment through this system. Note: The Minimum Investment Requirement for most mutual funds In Nigeria. 

5. Monitor Your Investment: 

Once you have invested, continuous monitoring of the mutual fund is necessary. Monitor the performance, fees, and investment philosophy of your funds You must do this to keep yourself up-to-date and, if necessary, to adjust. 

6. Consider Reinvestment: 

Reinvestment of dividends or income in the fund: various mutual funds offer the possibility that cash from your dividend payments can be reinvested in your actual unit. Which can allow you to grow your returns over time, and hopefully lead to bigger long-term gains. 

Conclusion 

Investing in mutual Funds is an intelligent way to diversify your portfolio, and by allocating the size of funds you can manage the risk side‐by‐side and then enjoy investing goals. The top mutual funds in Nigeria provide diversified options for different types of investors, ranging from cautious income-oriented funds to aggressive growth-focused ones. Taking into account your investment objectives, risk tolerance and the individual characteristics of each fund will help you to make a decision that starts aligning with your own financial success story. 

No matter if you are an experienced investor or just beginning, the most important thing is to find a mutual fund that meets your objectives and stay with it for the long haul. Mutual funds are therefore one of the important key strategies you can employ to create wealth and ensure your financial independence in Nigeria, however, this must be done with patience.