Top 5 Profitable Index Funds to Buy & Invest in Nigeria

Looking to buy and invest in Index Funds in Nigeria? 

Looking for a liquid Investment that performs more than your average passive investment?

Then look no further.

In this article, we’ll be looking at the top performing index funds to buy and invest in Nigeria.

Our analysis will consider the price performance and gains of each index for this year so far as well as over the last 3 months.

Why Invest in Index Funds?

An Index fund tracks and captures the performance of stocks and ETFs in the stock market.

They act like a bouquet of stocks that you can buy in order to profit from the summation of the performances of all the stocks involved.

A typical index fund can contain 20 to 30 stocks or even more.

But index funds are as liquid as the stocks they track, and you can buy and sell them just like you would buy stocks and equities.

Over the years, index funds have proven to perform better than the average investor or investor groups that invest using fundamental analysis.

In my opinion, I think an index fund performs well when the good stocks cancel out the bad stocks, but sometimes, the bad stocks could be in the majority and the index fund wouldn’t perform well.

A typical index fund can yield anywhere from 2% to 200% annually, which shows that on average, the investment tends to grow positively.

Nigerian Index Funds

Index funds are not quite popular in Nigeria, but they exist. They are listed on the NGX Indices and traded on the stock market just like any other stock.

The performance of index funds in Nigeria is not quite as stable as their international counterparts though.

I think that the fluctuations on the NGX Indices are just too frequent and there’s somewhat no guarantee that an index fund will perform optimally.

Yet, we still have some good index funds that continue to yield good returns for investors on a yearly basis.

Let’s take a look at five of the high-performing Index funds traded on the Nigerian Stock Exchange so far.

NGX Oil and Gas

This index fund is designed to provide an investable benchmark to capture the performance of the oil and gas sector.

It comprises the most capitalized and liquid companies in oil and gas marketing, and based on the market capitalization methodology.

The stocks tracked by this index include:

  • CONOIL   
  • ARDOVA   
  • ETERNA   
  • OANDO   
  • TOTAL   
  • SEPLAT

The NGX Oil and Gas has been the highest performer so far this year, with a whopping yield of 59.6% so far this year.

The NGX Oil and Gas started the year at 226.41 Naira and climbed further to 361.30 Naira as at September 23, 2021.

So far, no other index fund in Nigeria has performed to this level for this year. I’m sure investors are already looking to cash out their profit and smiling to the bank.

NGX Afrinvest Div Yield Index

This index fund is a unique index fund designed by Afrinvest to track and capture the stock market value of 12 high-performing stocks.

It comprises stocks picked from financial services, oil and gas, industrial, and manufacturing sectors.

The stocks tracked by this index include:

  • ACCESS   
  • AIICO   
  • CONOIL   
  • CUTIX   
  • DANGSUGAR   
  • FCMB   
  • DANGCEM   
  • FIDELITYBK   
  • GTCO   
  • UCAP   
  • UBA   
  • ZENITHBANK

So far, the NGX Afrinvest Div Yield Index has achieved a 13% growth this year.

Starting the year at 2,105.33 Naira, the NGX Afrinvest Div Yield Index has climbed up to 2,381.24 Naira so far, and is still rallying.

NGX Premium

This index fund tracks the stocks listed on the Premium Board of the Nigerian Stock Exchange, in terms of market capitalization and liquidity. 

It is regarded as a price index and is weighted by adjusted market capitalization (Listed shares x Closing price x Capping factor)

The stocks tracked in this index represents fully-paid common shares of 8 top tier stocks, which include:

  • ACCESS   
  • DANGCEM   
  • FBNH   
  • SEPLAT   
  • UBA   
  • WAPCO   
  • ZENITHBANK   
  • MTNN   

So far, NGX Premium has yielded a 8.9% return this year, and is still rallying.

Starting at 3,507.20 Naira at the beginning of the year, the NGX Premium dipped to 3,228.87 Naira before climbing to 3818.36 Naira, as at September 23.

NGX Pension

This index fund tracks the top 40 stocks in terms of market capitalization and liquidity. It is regarded as a total return index that is weighted by adjusted market capitalization.

The stocks tracked by this index are aggregated majorly from financial services, Consumer goods, Industrial Goods, Oil and Gas, and Conglomerates.

So far, the NGX Pension has yielded a 5.3% return this year.

The NGX Pension started the year at a share price of 1,422.01 Naira before dipping at 1312.02 Naira, then climbing up to 1497.58 Naira.

NGX Industrial

This index fund is designed to provide an investable benchmark to track and capture the performance of the Industrial Sector. It comprises the most capitalized and liquid companies in the industrial sector and is based on the market capitalization methodology.

Stocks tracked by this index include:

  • BERGER   
  • BETAGLAS   
  • CAP   
  • CUTIX   
  • MEYER   
  • DANGCEM   
  • WAPCO   
  • BUACEMENT   
  • NOTORE   

So far, the NGX Industrial is down by 8.8% this year, but it is beginning to pick up.

Starting the year at a share price of 2,147.93 Naira, and after several price fluctuations, is currently down to 1,959.07 per share.

However, if you zoom into the performance of this index fund for the last 3 months, you’d see that the share price is recovering and could rally late into the year.

Here’s the price trend of the NGX Industrial for the last three months:

Currently, the price looks like it is about to start an upward trend. While this isn’t set in stone, it is clear that the price is recovering.

Starting at 1,907.24 Naira and climbing to 1,959.07 Naira represents a healthy 2.7% growth in just 3 months.

If that figure is replicated in the last quarter of the year, NGX Industrial could end the year with a yield of 5.4%.

This would slightly surpass the current yield of NGX Pension, and that is for an index fund that looks to be performing poorly.

I strongly believe that the NGX Industrial represents a very good potential for profit, especially for investors who are coming late to index funds investing this year.

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