How to successfully invest 1 million Naira in Nigeria

How to successfully invest 1 million Naira in Nigeria

Navigating Asset Classes and Risk Appetites

This will explain how to allocate one million Naira to different asset classes based on your current stage in life. Asset classes are securities with the same attributes e.g. fixed income and variable income. You can think of them as drivers taking you to your intended investment destination.

Fixed income is an asset class that includes financial instruments which generate fixed returns such as ‘risk-free’ sovereign bonds or ‘risky’ bonds issued by the private sector. On the other hand, Variable income as an asset class includes all financial instruments that have no fixed returns but are instead, variable. Examples include equities, real estate investment trust (REITS) and derivatives.

It is generally accepted that fixed income assets are not as risky as the variable ones.

Now, allocating your 1 million Naira is dependent on three key factors:

  1. Age
  2. Risk appetite
  3. Luxury of time

For emphasis, this is a post on investing, not saving. Saving is simply putting aside some percentage of your income for later use while Investing is putting aside money with a specific objective and with expectancy of returns. To learn about saving, here are 11 tips for saving and investing in Nigeria.

What is your Age?

This is a key consideration because younger people can take more risk. As a young person, you have a better chance to start over if you lose all your invested capital. Aside this, when age is on your side, it means you have more time to compound returns. That is, your investments have more opportunities for returns to be reinvested for even more returns.

So, young people should invest in variable income assets like shares because even though there is higher risk, they offer higher returns. If you are close to retirement though, avoid investing more than 20% of your one million in variable income securities, regardless of how attractive the returns seem.

Is your Risk Appetite low, medium or high?

Your investment objective (s) will help you determine what kind of investor you are and the amount of risk you are willing to take. Does your desire to grow your investment capital with high returns exceed your desire to protect your principal from loss or are you smack in the middle? Consider this.

If your goal is to grow your investment capital with capital appreciation, then you should go for variable income asset classes like shares because they have a higher chance of beating inflation than fixed income assets. But, if your main objective is to protect your principal from loss and preserve it, then you should invest in fixed income asset classes. However, the risk in this is that your returns may be affected by inflation.

Do you have the Luxury of Time?

If you can keep your funds in the financial market without needing it back in the next five years, then you can go for variable income. For instance, equities; which have a higher chance of beating inflation.

Alternatively, if you will want your invested capital back in less than two years (24 months), it may be best to invest in fixed income asset classes. This will help you calculate and confirm the exact amount you will be getting back by investment maturity.

Consider these instances:

1. 19-year old graduate intern, Tiwa, received her first N1 million naira from her father as a convocation gift. She wants to save and build a house for rent in Lagos in six years. How should she allocate her funds?


  • 70% (N700,000) in Variable Income e.g. mid and large capitalization stock
  • 20% (N200,000) in Fixed Income e.g. investments on Pettysave, savings bonds etc.
  • 10% (N100,000) in Cash as disposable funds in the bank or your Pettysave wallet.


  1. Her investment goal is growing funds for the long term
  2. She may need funds before 6 years, so she invests 20% in safe & insured Pettysave investments that run for 3 to 18 months and probably government bonds payable every 24 months. This also allows her to diversify her investment portfolio so that all her eggs are not in one basket.
  3. She may need some cash to buy the land, so she put 10% in a Pettysave wallet or bank account to avoid liquidating any invested capital prematurely.

Read: 5 simple money lessons for millennials

2. Hassan, 61, almost retired, received N1 million Naira as part of his pension. How should he allocate his funds?


  • 80% (N800,000) in Fixed Income which will be split thus:
  1. N400,000 in Pettysave investments
  2. N400,000 in Federal Government Bonds (N80,000 each in 2 to 5 year bonds)
  • 20% (N200,000) in Cash as disposable funds in the bank or your Pettysave wallet.


  1. He is almost retired and his goal is preserving his funds. He has no risk capacity and variable income is a no-no for him. And despite a lot of fixed income recommendations, he has tactically allocated funds within the class.
  2. We have split his investment so that he earns returns yearly for the next five years. This gives him flexibility if interest rises and reduces risk because even if rates fall, he still has backup plans.
  3. 20% as cash in the bank or a Pettysave wallet provides him with disposable funds for emergencies and allows him to see his investments mature without breaking.

Read: 11 tips for saving and investing money in Nigeria

With these instances, we have covered the two extreme types of investors: low and high risk appetite investors. You may be like Tiwa or Hassan and you may even have mixed attributes like low risk appetite with a desire for high returns. If you’re the latter, you will need to find a midpoint and balance out your investment portfolio.

Now remember, when deciding where, how and when to invest, make sure to consider your age, your risk appetite and the luxury of time you have.

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About Pettysave

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