July 24, 2019/Cordros Report
As you know, rises in inflation means money gradually loses value and purchasing power drops. This is why it is ideal to consider inflation before choosing an investment option.
It is advisable to compare the Interest rate with the inflation rate before deciding to invest. This helps you know your “Real Return”. Also, to preserve the value of your money, returns (interest rate) should be above or equivalent to the inflation rate.
Nigeria’s Inflation rate is at about 11%, and merely saving money in a bank account yields about 3%. This means your savings will get you a negative real return. With Fixed income and Money Market Investment options, you have a positive margin against inflation. Below is a table of our investment options compared with Nigeria’s current inflation rate:
Type of Investment | Interest Rate | Inflation rate | Tenor |
Cordros Money Market Mutual Fund | 12%* | 11.2% | 1 year |
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Bond | 12.95%* | 11.4% | 1 year |
*Note that previous performance is not a guarantee of future performance of investment instruments.
Here is another table showing a quarter on quarter comparison of Cordros Money market Fund yields and Inflation rate.
Period | Q2 ‘18* | Q3‘18* | Q4 ‘18* | Q1 ‘19* | Q2 ‘19 |
CMMF* | 13.84% | 12.41% | 12.21% | 13.17% | 12.66% |
Inflation rate* | 11.77% | 11.22% | 11.33% | 11.31% | 11.38% |
*Average rate per quarter.
Not paying attention to inflation could have implications for your investment goals. The first step to having an edge over inflation is to take advantage of investment options that offer returns which outplay inflation.
As your partner in growth, we are always here to guide you in making the best investment decisions.
