Fund category
Equity funds
An equity fund holds shares listed on the stock exchange. Its unit price follows the market day by day and can fall sharply; it suits money you will not need for years.
- Risk
- HighLarge falls are normal in some years.
- Liquidity
- HighRedemptions are paid within a few business days at the fund's price.
- What it holds
- Shares listed on the stock exchange
- How the price moves
- Up and down every day with share prices
Equity funds are mutual funds that invest mainly in company shares. Their value moves with the stock market, so they suit investors who can stay invested for a long period. This page covers what they hold, how they behave, and why a strong past year is a weak guide to the future.
What equity funds hold
An equity fund pools money from many investors and uses it to buy shares in companies. The fund may hold shares listed in Nigeria, shares listed abroad, or a mix of both. The fund manager decides which shares to buy and in what proportion.
Because the fund holds many shares, one investor owns a small slice of a broad set of companies. That spreads exposure, but it does not remove risk. If share prices fall across the market, the fund's value usually falls too.
Some equity funds focus on particular sectors or company sizes. Others track a broad market index. The holdings and the rules of each fund are set out in its own documents, which are worth reading before you invest.
Volatility and time horizon
Share prices change from day to day, so the value of an equity fund moves often. Movements can be sharp in either direction. This is what people mean by volatility.
Short-term needs are a poor match for equity funds. Money you may need soon is usually better kept somewhere its value is steadier. Equity funds are generally used for goals that are far away.
A longer horizon gives the fund time to recover from falls, though it does not guarantee a gain. The right horizon depends on your own plans and on how you would react to a fall in value.
A common mistake is to pick a fund only because its recent return looked strong. That figure describes the past and says nothing certain about what comes next.
Sources 1
Every figure on this page points to one of these. The date is the day we read the source.
- 1Central bankGovernment securities summary, Central Bank of Nigeriawww.cbn.gov.ngtreasury bill auction rates