If you invest ₦5 million in a mutual fund, how much can you earn every month?

[00:00:00]If you invest 5 million NRA just a lump sum, you put 5 million NRA into a mutual fund, how much exactly are you earning every month? How much will you earn every month? If you only invest 5 million NRA into your mutual fund, you are not adding any money. You're not doing any top up this 5 million NRA and you watch your return. So if someone tells you they earn over 100,000 NRA, they earn over 200,000 NRA every month from mutual fund, would you believe them? What about people saying they earn 500,000 every month? The interesting part is this figure is possible with mutual fund. It all depends on where the money is invested. So let's look at a lump sum of 5 million invested in a mutual fund. And we're going to use three types of mutual fund. We're going to use number one the money market fund which is the service options of a mutual fund. Money market fund. Then two we are going to use a balanced fund.

[00:01:16]A balanced fund is also a medium risk option of mutual fund. And three, let's use equity fund. Equity fund. By the end of this video, you will know exactly how much each of these mutual fund could earn. You will know why the returns are different and the biggest mistake people make when choosing a mutual fund. Let's start with the sest option. The mmf which is the money market fund. Money market fund is categorized as one of the safest option of mutual fund because it is designed for people who want stability. Every investor wants stability. Instead of investing uh your money in company shares, these funds invest mainly in something called a treasury bills. Treasury bills which are government investments, government securities. They also invest in commercial paper. This is what a money market fund investing not shares of company and therefore shortterm fixed income investment. Because of that the returns are generally more stable but usually lower than other types of mutual fund. And for our analysis let's use a return of 16%.

[00:02:57]This 16% is common for most fund managers. It simply means that you are expecting to earn 16% of your money in one year with an investment of 5 million NRA which is our our case study amount 5 million NRA it will give you approximately 800,000 NRA every year.

[00:03:26]So if you put 5 million NRA into a money market mutual fund investment with 16% return you will get 800,000 NRA in one year and that comes to about 66,000 667 naira per month every month but don't forget that you did not work for that money your money works for you. Your investment generated this 800,000 NRA annual return. Well, of course, the value of your investment can fluctuate slightly depending on the fund. Money market fund don't fluctuate like equity fund. It only fluctuates slightly maybe a little drop to 15 something%.

[00:04:21]Not like an equity fund that can lose 10% in a month, 2% in a single day. Now let's move to the next category. What if you invest this 5 million NRA into a balanced mutual fund? What is the difference between a money market fund and a balanced mutual fund? A balanced mutual fund invests in both fixed income and stocks. Listen attentively. A balance mutual fund invest in money market fund money market fund and they also invest in shares of company. So your money goes into two places. One go to money market fund which is also called a fixed income securities like you know they invest in treasure bills these treasury bills have predictable returns their part categorized as fixed income you know how much you are getting when they promise you they paying 15% it does not fluctuate it does not change and then some parts go into shares of company this one is high risk so a balanced mutual fund balance ize the risk. Some to stabilize your returns and some to grow your returns to grow your investment. That is what a balanced fund is. And historically, some balanced funds in Nigeria average around 30% per year. So historically, a balanced fund can give may give about 30% return in a year. And using the same 5 million naira investment, a 30% annual return gives you 1.5 million naira. Remember, for the money market fund, you get around 800K 800,000 NRA in a year on your 5 million NRA. But for a balanced fund, if we use the historical percentage of 30%. You get around 1.5 million NRA in a year as your return.

[00:06:37]And that is about 125,000 Naira every month. This one is yearly and this one is monthly per month. Look at that.

[00:06:51]Almost twice what the money market fund generated. So what actually change? It is not the amount you invested but the types of fund you choose. Now let's look at the category that usually attract the most attention. This category uh is where people want to grow money over a long time we definitely invest in. It is called the equity mutual fund. What is so special about equity fund? Equity mutual fund. Equity mutual fund invests primarily in shares of companies. Shares of listed companies. These are company stocks listed on the Nigerian exchange.

[00:07:42]That means your returns depend largely on how the stock market performs. This is very important for everyone looking to invest in mutual fund. What actually determine your returns on equity fund is the performance of the Nigerian stock market or any country stock market you are investing in. When the market performs very well, equity funds also produce bigger and highest returns among the three categories we have looked into. But doing weaker markets when the stock prices are falling that will also affect your investment negatively. You will experience large declines in your total portfolio. both the interest you have earned and the capital you have invested.

[00:08:39]Now assuming an average return average annual return of 40% that means your 5 million NRA investment could grow by approximately 2 million naira. Your 5 million NRA may may grow to get the return of 2 million naira in one year. That work out around 1666, 667 naira monthly return on your 5 million naira when you invest it in equity mutual fund. Okay, let's do a quick comparison.

[00:09:22]But before that, if you have not subscribed, I noticed that some of you watch my video and you don't like the only free thing cost free thing that you can do to support this channel is when you subscribe and you like this video.

[00:09:36]When you do that, other people may find this video helpful. Thank you so much for supporting this channel. Let's compare all these three mutual fund and their return.

[00:09:49]to compare it. I like to show you the table. So you see the difference between these three. This one have mmf [snorts] which is the money market fund. Then this one go for the balance fund. Let's call it BF, balanced fund. And let this one be equity fund. Let's call it EF, equity fund.

[00:10:13]Money markets fund, balance fund and equity fund with an investment of 5 million NRA. This money market fund gives around 66,667 naira every month. You just sit back.

[00:10:28]Sit back and watch your money. Watch your returns comes in. Maybe you have some big amount in your bank that is not yielding good return. Pack that money into a money market fund that can give you around 16%. In a balance fund you give 125,000 NRA every month monthly. So in a balance fund based on historical performance you get 125,000 NRA every month. What about the the equity fund that will give you around 166,67 naira every month. Same 5 million NRA investment but different returns. So should everyone choose equity fund? This one look juicy. It looks the return is is good every month. Should everyone pause this, pause this and just do the equity mutual fund? This is where many investors make a costly mistake. They focus only on returns and they forget the risk. A money market fund is generally more stable most stable preditable income. Equity fund offer the greatest potential for growth but they also experience the biggest ups and downs. What if the stock market goes bad? What if stock prices are falling and it affects your fund, your investment on the equity fund? The right choice depends on your investment goals.

[00:12:16]If you don't care much about the ups and down of the stock market and you can hold you will not panic and sell your entire investment when the uh when the when the fund is not going well maybe when you are experiencing some negative in your uh portfolio if you can hold you can go for equity fund or you are investing for long term and there is an important information I need to tell you the return used in this video are based on past and current performance When you check the equity mutual fund, you might see this rate, but this does not guarantee future returns. They are not guaranteed. Prices and interest rates can fluctuate. The future returns may be higher than this one or lower.

[00:13:06]And no fund manager can promise a specific returns. Past performance should never be seen as a guarantee for future results. Okay, let me hear from you. If you had your own 5 million NRA, which of these three mutual fund would you invest your money in and why? Or maybe you have your own different idea from all these mutual fund. Let us know in the comments so we learn together. Thank you for watching and I see you in the next