How to Squeeze More Profit From Your Investments

By Babajide Komolafe

“I’ve got shares, get dividends, then just buy more shares. But what else can I do with that dividend income? Is there a smarter move than just plowing it back into the same old thing?”

Good question. Previously, I talked about diversification. Don’t just recycle your returns into the same investment. Think different asset classes. It’s about shifting those profits into something less risky and, crucially, more accessible. You know, liquid. That way, you’re hedging your bets, protecting both your initial capital and the earnings it generates.

Now, this reader is in stocks. So, what to do with those dividends? I’d suggest mutual funds, especially the fixed-income kind. Think money market, bond, or even dollar-denominated funds.

Shares? They’re riskier than these fixed-income mutual funds, no doubt.

See, with shares, a price drop means potential loss. Fixed-income funds? The risk is really low, almost nonexistent. They invest in things like treasury bills, bonds, commercial paper – interest-generating stuff where the original investment is pretty much guaranteed to come back to you.

The interest rate? Sure, that can fluctuate with the overall market. High rates mean higher returns; lower rates, well, you get the picture.

Choosing a fixed-income fund? For now, I’d lean toward money market funds. They focus on those short-term instruments: treasury bills, bank deposits, commercial paper. With rates as high as they are right now, many money market funds are showing year-to-date returns of 19% to 21%. Plus, you can get started with as little as N5,000, then add just N1,000 later, which makes it easy to put small amounts into the investment over a period of time. That’s why money market funds are so popular, more than other types of mutual funds.

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