Yes, it can still make sense to invest in dollar mutual funds on Cowrywise, even if the naira has been relatively stable. However, the reason for investing changes slightly.
Here are the main considerations:
Protection against long-term naira depreciation. Even if the naira is stable today, Nigeria has historically experienced periods of significant currency depreciation. Holding part of your investments in US dollar assets can help preserve purchasing power over the long term.
Diversification. Dollar mutual funds give you exposure to foreign currency-denominated assets, reducing the risk of having all your investments tied to the Nigerian economy and the naira.
Returns may still be attractive. Dollar mutual funds typically invest in US dollar fixed-income securities or other dollar-denominated instruments. Besides any exchange-rate gains, they may also earn interest in dollars. The exact return depends on the fund’s portfolio and prevailing US interest rates.
On the other hand, there are trade-offs:
If the naira remains stable or strengthens, you may not benefit from currency appreciation, and your naira-denominated returns could be lower than some local investments.
Nigerian money market funds, treasury bills, or bond funds may currently offer higher nominal naira yields, although they are exposed to inflation and currency risk.
A balanced approach
Rather than choosing one over the other, many long-term investors keep a mix of both:
Naira investments for higher local yields and liquidity.
Dollar mutual funds for diversification and protection against future exchange-rate risk.
Since you’ve previously shown interest in building long-term wealth through shares and other investments, maintaining some allocation to a dollar fund alongside your Nigerian equity and fixed-income investments can be a sensible strategy.
If your investment horizon is 5 years or longer, I would generally not stop investing in a dollar mutual fund solely because the naira has been stable for a few months. Instead, review your overall asset allocation and continue investing according to your long-term goals rather than short-term currency movements.