Exchange renews call for portfolio diversification

The Nigerian Exchange Limited (NGX) has renewed the call on investors to diversify their portfolios to ensure an increased return on investment.

The Chief Executive Officer of NGX, Temi Popoola, said as the stock market continues its rally, there is the need for investors to leverage different asset classes and securities in the market to minimise the overall risk of the portfolio.

So far this year, the Nigerian stock market performance has been buoyant with the NGX-All Share Index (NGX-ASI) year-to-date (YTD) returned standing at 23.1 per cent as of May 25, 2022. It is currently over 50,000 for the first time since the 2008 crash as opposed to the broad-based bearish performance experienced in other markets.

Popoola stated that despite the current appreciation in prices of equities, opportunities still exist for investors in other asset classes.

He said NGX has various products for every investor regardless of their investment goals, risk appetite or return expectations. He listed the products to include: equities, fixed income, exchange-traded funds (ETF) and derivatives.

According to him, there are opportunities in every segment of the market and across the various asset classes if investors can do the analysis, and understand where those opportunities are.

He stressed the need for investors to diversify and rebalance their portfolios, noting that it would go a long way to reduce the systematic risks in each asset class.

According to him, the fundamental purpose of portfolio diversification is to minimise the risk of investments, especially unsystematic risk.

He pointed out that this risk of significant loss is further compounded if the stocks belonged to the same sector as manufacturing because any pronouncement or information that affects the performance of one manufacturing stock could also impact negatively on the other stocks in a similar way.

Popoola however said that the Nigerian capital market and the business of the stock exchange would always be impacted by dynamic economic trends and investor demands.

Explaining further, he said achieving success through growth that creates value will increase the exchange’s ability to operate efficiently and profitably in the transient advantageous economy that has unfolded in Nigeria and around the world.

“While there has been no respite in the macroeconomy and operating environment due to lingering oil price and foreign exchange pressures, our long-term outlook for the exchange remains positive as listed companies continue to show resilience and our members have been repositioned to deliver superior value to investors,” he said.

Popoola assured that NGX would continue to design more products that would attract Nigerians, especially the youth demographic to the market.