Stable currencies are to investments what stew is to rice. For the best results, they absolutely have to go together. This is because your investments are supposed to be long term and if your currency is constantly being devalued, 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 dollars.
What does Devaluation Mean?
Devaluation is the deliberate reduction of the exchange rate of a country’s currency relative to another currency. It is done for a number of reasons that are beyond the scope of this article, but mainly it helps the central bank manage its balance of trade. Devaluation is both a consequence of and a contributor to high inflation. For you as an investor, the combination of naira devaluation and high inflation means that your investments are generally losing value unless they’re in an appreciating currency like the dollar.
The history of the naira against the dollar has been a story of a consistent downward slide in value. In fact, between 1972 and today, the naira has lost 12% of its value every year on average. This means that your investments have to be out earning that loss every year just to stay even, pushing you toward riskier investments. By investing in dollars, you’re immediately retaining that 12% loss in value, and then any additional gains in dollars translate into a real increase in your investments. Or put simply, investing in dollars will vastly improve your long term performance.
More than Dollars
Beyond just having your investments in dollars, you should consider adding foreign investments to your portfolio. This allows you to invest in an appreciating currency, and 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.
How Rise Comes in…
Rise is a product that allows you to automatically invest in global dollar investments straight from your naira account. We make dollar savings and investment easy and convenient with minimums as low as $10 (N3600) and assets ranging from US real estate, US stocks, fixed income and more. This means you’ll invest like the ultra-wealthy, and earn stable returns and never experience naira inflation or devaluation again.
We’re the dollar-denominated hedge fund that everyone can be a part of. Start your Rise today on rise.capital.