The stock market is a bum right now and rather than keep money in the bank, I have gone ahead to learn about the benefits of investing in treasury bills. First what do I mean by treasury bills?
A treasury bill is a short-term obligation backed by the Nigerian government with a maturity of 30, 60, 90, 182 and 365 days respectively. Minimum investment required starts from N100,000 and can be purchased through most financial institutions within the country. However, I will also recommend GT Asset Management as well. I’ve been using them for all my treasury bill investment till date. Treasury bills are issued through a competitive bidding process at a discount from par, which means that rather than paying fixed interest payments like conventional bonds, the appreciation of the bond provides the return to the holder.
So how do you calculate the returns on your investment? Kindly see the table below for different scenarios based on individual budget;
|Principal Sum to invest||No. of days||Interest Rate||Expected payout|
As depicted in the table above, the longer your investment period, the higher the expected payout on your investment. How did I calculate this? Simple…supposing you have N1.5million naira lying idle in your savings account earning a measly 4% interest per annum and are interested in treasury bills, this is how to calculate your expected payout. The first thing to note about 2012 is its’ a leap year i.e. 366 days and not 365 days. Secondly if you’re not in dire need of this fund, I usually advise you go the long haul by investing for 182 days or 366 days instead. Thirdly divide your preferred investment period by the total number of days in the year x the interest rate (as advertised by the Central Bank of Nigeria) i.e. 182/366 x 0.13 or 366/366 x 0.13. Fourthly, multiply the value you get by the principal amount you want to invest i.e. 182/366 x 0.13 x 1,500,000 to obtain your payout. It’s as simple as that.
I also recommend you keep re-investing initial principal and interest to generate higher returns over a longer period of time if you don’t need the money right away. That’s my wise investment tip for the smart woman or man out there for the week.
You can also reach GT Asset Management via;
Enjoy your weekend!!!