Market Slice: Mutual Funds in January 2021

Market slice is a monthly summary of mutual funds on Cowrywise and key money news. This jargon-free report is shared on the 3rd of every month. Share lessons on Mutual Funds in January 2021 using the hashtag: #MarketSlice

Hey there ??

I think this year’s January cooperated with us all because it wasn’t that long. It felt more like 35 days than the usual 90 days and I am sure glad about that! Before we go into how mutual funds performed last month, I’ll like to share one of my pet peeves with you – sentences that begin with “Am” in place of “I’m” or “I am”.

However, when the richest man in the world uses it I guess I have to accept. At $180 billion, it is allowed, please. ?

Am donating $100M towards a prize for best carbon capture technology

— Elon Musk (@elonmusk) January 21, 2021

How Mutual Funds Performed in January 2021

Top Equity Funds

After a little slow down, equity funds bounced back to dish out beautiful positive returns in January. Trust me to explain why this happened as you read through the article.

Top Fixed Income and Balanced Funds (NGN)

Top Fixed Income and Balanced Funds (USD)

? How do you like them shorts?*

Asides from being the fastest January, last month came with some interesting moments. It seems everyone became a stock analyst. Words kept flying around; from shorting to short squeeze and hedge funds. If you got lost, here’s a primer that starts with shorting.

Shorting Stocks: Jake has credible information that the price of a phone type will drop in 2 weeks. So, he borrows the phone type from his gadgets vendor friend and sells immediately at ₦200,000. He expects the price to hit a low point of about ₦120,000 in 2 weeks. Then, he’ll buy the phone (a new one of course) back and return it to his friend–keeping the difference between the old and new prices. This arrangement means Jake is shorting the said phone. Now, replace the phone with stocks. Do you get it? Awesome.

Short Squeeze: Take your imagination further a bit and think of what would have happened if the price of the phone kept rising? At some point, Jake would be forced to buy the phone at a higher price to prevent further losses. When such happens with shorting stocks, a short squeeze is said to have happened.

Hedge Funds: These are similar to mutual funds but only open to high-level investors (approved by a regulator). They usually take on risky positions like shorting stocks.

The point?

In January, there was a face-off between retail investors and hedge funds. When a community of retail investors got word that a hedge fund was shorting the stock of GameStop, they rallied together. By purchasing the stocks they forced the price up, leading to a short squeeze for fund managers shorting Gamestop’s stocks. This cost the fund managers billions of dollars. A good number of retail investors (in the US particularly) have continuously blamed hedge funds for the 2008 financial crisis. So, the beef is understandable.

*As Robinhood put it, the retail investors asked the hedge funds: “How do you like them shorts now?”

? The best stock market? Nigeria won that.

The best way to start this would be with the street slang: “E shock you?”, which means are you shocked? In December 2020, Bloomberg announced Nigeria as the best performing stock market globally. That win doesn’t seem to be ending soon as the market still came out tops, albeit in Africa this time. Now, you understand why equity funds made some good returns in January.

A top contributor to the January win was a top telecoms stock. Interestingly, some equity funds on Cowrywise have this stock in their portfolio. For a refresher, equity funds are mutual funds that invest in stocks. They save you the stress of picking stocks on your own and lower the risks of investing in them.

Investing in an equity fund earns you the rare “Brave One” money badge.

Your move?

Stock or equity mutual funds are a great way to invest given the possibility of high gains. Despite the fact that they’re less risky than investing in stocks directly, they are still risky. In essence, you can lose your capital. The best approach for investing with them is to automate a set amount at a particular frequency. For example, ₦20,000 weekly. Already have an account on Cowrywise? You can start here.

Want to begin your journey? Click the image below.

? Data snap of the month

There have been claims that women save better than men. ?
Not to take sides, but we might have some proof for this. The third-largest Savings Circle on Cowrywise is a women-only Circle. On the other hand, the men-only Circle is the seventh-largest. What’s up bros? ?

» Learn More: How Circles Work