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5 factors to consider when investing in Mutual Funds in Nigeria

May 1, 2023
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Investment Objectives & Time Horizon

Before investing in mutual funds, you should consider why you want to do so in the first place. What do you hope to accomplish with your investments? Are you seeking long-term wealth growth, short-term income, or a combination of the two? Understanding your investment objectives will help you in selecting mutual funds that align with your financial goals and risk tolerance. For example, if you’re investing in retirement planning, you can buy a more aggressive mutual fund (equity fund) than someone investing to purchase a car in a few years, who should ideally go for a more conservative fund (fixed income fund). In summary, the shorter your time horizon (how long you hold your investments), the less risky your mutual funds should be. Longer-term investors can be less conservative as they will have enough time to wait out stock market falls.

Consistency & Past Performance

Performance history is a key factor to consider before investing in mutual funds. A mutual fund’s historical returns can be learned by looking at its prior performance, however, it’s crucial to remember that past performance does not always guarantee future outcomes. So, it’s important not to focus on short-term gains alone, but also look for mutual funds that have consistently generated competitive returns in the long term. For instance, a fund that ranks 10/20-13/20 consistently should be chosen over a fund that is 2/20 one period and 18/20 in another. Look out for good performance and consistency over ranking alone.

Asset Management Company’s Track Record

This second factor is tied to the previous one in terms of checking for historical performance but in this case, not the mutual fund itself but the holistic performance of the mutual fund provider, for example an Asset Management Company (AMC), this is because the success of a mutual fund can be greatly influenced by the knowledge and experience of the fund managers. To be sure that the AMC can manage the fund properly, look at their experience, investment philosophy, size of assets under management (AUM) and performance history. Coronation Asset Management is a credible AMC with professional fund managers known to manage risks efficiently and that will properly monitor your investments. 


Expense fees, such as levies when you sell units of your mutual funds within a tenure (also called an “exit load”) are important to note. Similarly, when you purchase mutual funds through third parties like brokers or your bank, there are commission fees that would be incurred. Essentially, understanding mutual fund fees and taking them into account when making investment decisions can maximize your returns. To cut costs, look for mutual funds with lower expense ratios.

Risks and Market Conditions

Though mutual funds are lower-risk asset classes, just like any other investment you should do your due diligence. Understanding the risks involved with the mutual funds you’re considering is essential. These risks range from market risks to interest rate risks, credit risks, and other variables that could affect the performance of the fund. More importantly, stay educated about the economy’s prospects and market circumstances as well to make wise investing decisions.

Bonus pointOnline Investment Options

Technology advancements have led to the availability of online investment options, such as investment platforms and apps that make it simple to access mutual funds. These online investing options can make managing your money more convenient and transparent, but it’s crucial to thoroughly investigate and assess them for dependability and security precautions before using them for your investments. Make sure to research the investment options available, including online mutual fund portals, investment apps, and other investment avenues. Wealth by Coronation, for example, is a credible online investment app and it is available on both the Apple and Android App Store. It offers mutual funds and a range of other investment vehicles.

In addition to the above factors, it’s also important to consider your financial situation, goals, and risk appetite when investing in mutual funds.

Furthermore, when it comes to investing in Nigeria specifically, there are some unique considerations to keep in mind. Nigeria is a fast-growing economy with a growing middle-class population and a vibrant investment landscape. However, it also presents its own set of challenges and risks that you as an investor need to be aware of.

Some of the key considerations before investing in Nigeria include local market conditions, the economic and political landscape, regulatory environment, and currency risks. Nigeria, like any emerging market, can be subject to volatility and uncertainty, so it’s vital to carefully assess the risks involved in making informed investment decisions.

Similarly, for beginners in investing, it’s important to educate yourself about the basics of investing. For instance, the types of mutual funds such as Money Market Funds, Equity Funds, Fixed Income Funds, and Balanced Income Funds discussed above. All these diverse funds ensure you choose the best asset classes suitable for your lifestyle and financial goals. There are several resources available, including online tutorials, courses, and books, that can provide valuable insights and guidance for beginners and experts alike (Check out Coronation Academy). It’s also advisable to start with a small amount of capital and gradually gain experience and confidence in investing before committing larger sums of money. With Wealth by Coronation App, you can start investing in mutual funds for as low as ₦ 10,000.

Conclusively, investing in mutual funds in Nigeria or any other region requires careful consideration of various factors, from investment objectives to performance history, fund expenses, fund managers’ track record, risks and market conditions, and online investment options. It’s important to thoroughly research and understand the risks associated with investing in a specific country as well as the local market conditions and regulations. By doing your due diligence and seeking professional advice when needed, you can make informed investment decisions that align with both your financial goals and risk tolerance. All investments come with elements of risk; however, mutual funds are generally known for their affordability and low entry barrier, and the key to success is to start early.

This by no means covers every area of investing in mutual funds in Nigeria, but will provide a good start to your investing journey.

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