Welcome to a new week and just like that, we have come to the last Monday of January 2021!
This week we will be discussing what I will term “niche investing”. During my video discussion with Sola Adesakin (this can be viewed on her YouTube channel), I had mentioned that one of the characteristics I noticed about many wealthy investors was that they have their niche areas of investing. Whilst wealthy investors tend to spread their investment vehicles, many if not all, favour either a particular asset type or sector.
According to the Cambridge dictionary, the word niche can be defined as a job or position that is very suitable for someone, especially one that they like. Even though the word is typically used with respect to business, it can also be used with respect to investing.
Warren Buffet is famous and of course, very wealthy as a result of his knack for finding and investing in stocks or shares of good or well managed companies. In fact, he is the only investor amongst the 20 wealthiest individuals in the world, many in that esteemed group got there by either founding or inheriting businesses that have done well in their chosen fields think Bill Gates, Jeff Bezos or Ann Walton.
Niche investing is basically about identifying the asset class you are comfortable with, studying and seeking knowledge about it, and then looking for the best opportunities in that asset class to put money in.
This does not necessarily mean a concentration, or a lack of diversification in one’s portfolio; it just means that there is a particular asset class that you gravitate to. These type of investors tend to play the long term game and as such, it is advisable to note that niche investing is done with own’s equity.
Although investing as a vocation can (largely) be speculative, niche investors go against the grain because they tend to gravitate towards more informed investment decisions – many of them concentrate on assets they have a good grasp of.
Niche investing is typically attractive to those nearing retirement or are fully retired as it enables them build generational wealth for their descendants.
For example, real estate (of all types – residential, commercial and land) has traditionally been the default investment vehicle of many Nigerian investors and wealthy families. This is majorly because land and property prices have generally appreciated over the years and as such, it has proven to be a good way to store wealth as it is a proven hedge against inflation.
In addition to stock and real estate, art is another asset class subject to niche investing. A good example are the Nahmad brothers – David and Ezra whose net worth is made up primarily of their art collection. Both brothers own an art collection valued at $3 billion. Like Warren Buffet, the brothers started investing in their art collection early.
In summary, niche investing is basically an investment strategy and financial advisors will always recommend that it be adopted as part of a holistic investment plan and not in isolation. In other words, niche investing is a means to an end and not an end in itself.
Please be reminded that the COVID-19 virus is infecting more Nigerians and that more importantly, the vaccines are currently unavailable in Nigeria.
As such, we must continue to take personal responsibility for ensuring our safety and those of our family members.
Keep washing your hands, maintain social distancing and wear your face masks in public.
I wish us all a wonderful week ahead.