Here are seven tips to guide you when making investment decisions in troubling times.

1. Appreciate the prevailing economic conditions

The first step to finding a solution to a problem is to understand the problem.  You need not be a financial expert to understand what is happening around you.  Pay attention to political and economic developments and constantly analyze how such developments affect your life.

If you pay attention to the news filtering from both mainstream and alternative media you will know that Nigeria is currently grappling with an inflation rate above 30%, fuel price hikes, and currency devaluation.  You will know that these have significantly affected people’s purchasing power.

Individuals who understand these events will realize that traditional wealth creation strategies like saving money in current accounts, for example may not be effective due to the negative impact of high inflation.

By understanding macroeconomic developments, you are able to decide on appropriate asset classes to invest in difficult times. Engage professional who will help you to look out for asset classes that have the potential of preserving your capital, offering steady returns, presenting low risks and delivering above inflation returns. 

Turbulent times are not the best time to keep your cash idle.

2. Diversify Across Asset Classes

One golden rule of investing is diversification, and this is even more important in difficult times. Spread your investments across different asset classes such as stocks, bonds, real estate, and cash to minimize risk. If one sector suffers, others may balance your overall portfolio.

Equities:

Despite the volatility in the Nigerian stock market, there are opportunities. Look for companies in defensive sectors, such as consumer staples, telecommunications, or energy. These industries tend to perform well even when the economy is sluggish because their products and services remain in demand.

Commodities:

Consider commodities like gold or crude oil. Nigeria is a major oil-producing nation, and while the oil market can be volatile, investing in companies with exposure to oil and gas can provide protection against economic downturns.

Invest in Foreign Denominated Assets

With the naira experiencing significant depreciation, diversifying into assets denominated in foreign currencies such as the U.S. dollar, euro, or pound will be a commendable course of action. This can be done through foreign stocks, ETFs, or mutual funds that give you exposure to international markets. You can also open a domiciliary account with Nigerian banks, which allows you to save and transact in foreign currencies, protecting your money from naira depreciation.

Another option to consider is investing in global exchange-traded funds (ETFs), which allow you to invest in foreign stock markets and currencies. Some Nigerian investment platforms allow you access to these opportunities.

3. Explore Dollar-Cost Averaging (DCA)

Given market volatility, it can be hard to time when to invest. Dollar-cost averaging (DCA) is a strategy where you invest a fixed amount of money at regular intervals, regardless of the market conditions. This allows you to purchase more shares when prices are low and fewer shares when prices are high, averaging out your cost over time. This approach is ideal for long-term investments, such as building wealth for retirement or education.

4. Invest in Yourself and Develop New Skills

Investing during tough times doesn’t have to be solely financial. In an unstable economy, job security can be uncertain, and expanding your skill set can provide a safety net. Take courses, learn a new skill, or start a side business. Developing yourself increases your earning potential and provides you with more financial options in difficult times.

5. Focus on Long-Term Investments

In uncertain times, it’s essential to have a long-term perspective. Trying to predict short-term market movements can lead to poor decision-making and unnecessary losses. Instead, focus on investments that align with your long-term goals, such as retirement or property ownership. Historically, markets tend to recover over time, so holding on to your investments will likely pay off in the future.

6. Stay Informed and Seek Professional Advice

The investment landscape is constantly evolving, especially in turbulent times. Stay informed about the economic situation, market trends, and the performance of your investments. Follow reputable financial blogs, attend investment seminars, and engage with financial news platforms. More importantly, consult a financial advisor who can help you tailor an investment strategy to your specific needs and goals.

Conclusion

Investing in difficult times can be daunting, but with a well-thought-out strategy, it is possible to grow and protect your wealth. Prioritize inflation-protected investments, diversify across asset classes, and consider foreign-denominated assets to hedge against naira depreciation. Embrace a long-term mindset and seek professional advice when necessary.

DFC Asset Management Ltd can help you navigate these turbulent times by providing expert guidance and tailored investment solutions. With our deep understanding of both local and global markets, we assist you in making wise investment choices that safeguard and grow your wealth, even in challenging economic conditions.