In line with global trends, Nigeria’s economy is going through multi-faced challenges, including historic inflation, currency depreciation which has reduced purchasing power and made investment decisions more difficult for most people.

However, Adekunle Akintunde, Chief Investment Officer, Halo Asset Management, in this interview affirmed that notwithstanding the challenges, this is a good time to invest. He also provided insights on how to make profitable investment during tough economic times.

By Babajide Komolafe, Economy Editor

What is the first and crucial thing to note in a recession?

When in a recession, do not panic. It is quite easy to fall into worry or to be anxious when times are uncertain. However, if you can, [by yourself] or with the help of a professional, try to keep your emotions in check. What you ought to do instead, is immediately focus on spending wisely; create a budget and stick to it. With your budget, you can decide what percentage goes to your needs, what goes to your wants, and importantly what goes into your savings and investments.

Budget allocation is important because you cannot use your rent money, for example, to invest in a downturn. You should only invest idle funds or funds you do not have an immediate need for.

In times such as this, especially with what past recessions have taught us, this is not the time to shy away from investments.

However, circumspection in decision-making as it concerns investments has to be a priority.

What advice do you have for anyone new to investing?

For people like that, it is advisable to put your money in fixed-income securities where your return is guaranteed. If you have some long-term funds, that is money you don’t need to access for five years or more, you can put them in the stock market. I would recommend equities, focusing on fast-moving consumer goods, because even in a downturn people will still buy these consumer goods. In the long run, they should give a good return on investment.

What are your thoughts on diversifying one’s portfolio, especially with the state of the market?

A discussion on diversifying your portfolio is heavily reliant on your risk tolerance. If you are risk averse, I would advise putting your funds in a professionally managed mutual fund. This way, you don’t have to monitor it daily, as you likely do not have the expertise to manage the portfolio properly by yourself. Halo has an array of mutual funds you can invest in, and we have plans to run a Halo equity fund which is undergoing regulatory approval.

However, if you insist on diversifying your portfolio, put a larger percentage of the funds, about 70%, in Fixed income securities where the principal is guaranteed, or invest in Real Estate. The rest can go into riskier investments. This way, your overall portfolio is balanced.

For more risk-loving folks, it is best to get some knowledge on investing and managing your own stock portfolio, otherwise, you will lose money. If you devote some time to learning about the ups and downs of the market, you can tell when it’s a good time to enter the market. However, picking the right stocks is important. Look for stocks trading below their fair value, as well as stocks in fast-moving consumer goods, as I mentioned before. You also have to track and monitor these equities regularly.

Whatever the case, you must decide what your investment strategy is. Ask yourself, ‘what are my investment goals?’, and ‘what is my investment horizon?’ Your investment goals are what you hope to achieve and what you intend to achieve with the proceeds of your investments. Your investment horizon speaks to how long you can keep the money in the portfolio.

Do you plan to trade actively and make money, or do you want to invest passively? Do you need the money soon or can you hold the investment for a while?

Here’s the difference. With long-term investments, you do not have to monitor them so often. When you invest with plans to trade and make money, however, you have to monitor the markets daily to see if you have made money or to know the appropriate time to exit the market. You also have to listen to stock market reports and financial news on how the economy is doing and monitor new or revised policies from the government. This is why financial experts often suggest having a professional portfolio manager invest for you.

My advice is to think long-term. There is no saying whether we are in the worst of the downturn; it could get worse. Stocks you buy now could sell for cheaper because the market still may have not reached rock bottom. If that happens and you panic and sell, you lose money. The best thing is to wait it out until the market recovers. You can then exit the market and put your money in an instrument with a guaranteed return.

Based on what we know from past recessions, when do you think the global market will recover from this recession?

We cannot accurately predict when the global market is likely to recover from this recession based on past recessions. The last recession was in 2007 and was brought about by the housing crisis in the USA which had a domino effect and affected the global market. Every global recession is peculiar, so until the Russia-Ukraine war is resolved, we just might be in this recession longer than we hope. Analysts have it that the war should not last for much longer. It is certain, however, that after every downturn is a boom. So, it is wise to consider making investments now.