Dear Money Africa

Good morning and how're you doing?

What are your plans for the weekend? Hope it includes some fun and a bit of personal development. 

Friday newsletters are for answering questions from our community. Do you have a burning question, please feel free to send a DM to our social media channels. You can also send an email to [email protected] 

Question:

What currency is best to keep money at this time? Dollar or Naira? Okey

Answer:

Dear Okey,

There are a few factors you left out in your question. Are the funds being kept for use in Nigeria or will they be needed to settle an obligation abroad? If the funds are meant for settling obligations abroad, then the US dollar would be a better option. 

What duration do you have in mind to keep this money? A few months? A few years? If it's for a few months, then the dollar may not be an ideal currency. 

The average annual inflation rate in the US is about 3.2%. That means the prices of goods and services will double about every 32 years. 

The average annual inflation rate in Nigeria is about 12.7%. That means the prices of goods and services will double every 8 years. 

If you intend to keep this sum of money for a reasonably long period of time, then the US dollar would be a better option for you. The US has a much lower inflation rate. 

Question:

Is S&P an example of an ETF? What should one look for when investing in an ETF? -Funke

Answer:

Dear Funke,

The S&P 500 is an index. An index tracks movement in a basket of items. Think of a basket of food with different items in it. Like rice, fruits, meat etc those could be Amazon, Facebook, Netflix. So that index tracks what’s in the basket.

In this case, the S&P 500 is a measure of the stock performance of the 500 largest publicly traded companies by market capitalization in the United States. Market capitalization is when you multiply the number of shares a company has issued by the current market price of 1 share. So let’s say Tesla is $500 and there are 1,000,000 issued shares, the market cap $500,000,000

ETF means Exchange Traded Fund. Many ETFs track indexes but you have those that are a collection of items. So, you can have an ETF that tracks and mirrors the S&P 500 index. It could do so in an active manner, meaning it will add or drop stocks as soon the index changes. It may also do so in a passive manner. Meaning changes may be less frequent. 

There are a few key factors to consider when buying an ETF. The most commonly checked factor is the expense ratio, which is how much a firm charges to manage the ETF. The reputation of the firm issuing the ETF, liquidity of the ETF and the liquidity of the assets it holds are also key. Liquidity measures how quickly one can buy or sell an item. 

The most important factor, however, is the composition of the ETF, which is based on an underlying index. If the index has a few firms with a heavy weighting, then movements in the price of those firms will have an equal weighting on an ETF that mirrors such an index. Aim for an ETF with a diversified group of assets.  

Question:

My grandfather died a few months ago, and according to Islamic law, his properties are to be shared. He bought shares of different companies. How do we access them? -Mariam

Answer:

Dear Mariam,

The first thing to do would be to search for his name in the SEC unclaimed dividend portal here.That would give you a rough idea of the companies he had shares in. You can then write to the registrar of each company. The registrar is the firm in charge of shareholder records. 

Please check around for any documentation pertaining to shares he bought, such as share certificates or dividend slips. 

However, you will need to attach a proof that your grandfather had passed away, as well as a documentation showing you have the mandate of your grandfather or his estate to pursue this. You will need to get in contact with a lawyer to help you out with this, as it may require some documentation from a court.

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That's it for now.

Have yourself a great weekend.

Even as you rest, take the time to learn something productive??