Investing in tough times: A hype or a hope?

Many people are asking themselves, “Is it possible to invest with the economy in such a state?”

With inflation on the rise and an economy that seems to present new hurdles daily, particularly here in Nigeria, it’s natural to wonder if holding off on investments might be the safest route. However, investing can become your best strategy for securing a stable financial future, even during economic turbulence.

Think of it as a way to “bulletproof” your future. After all, if you consume everything today, there won’t be seeds left to plant for tomorrow.

Even if you can only start small, the act of investing—no matter how modest—strengthens your financial resilience. Building this habit doesn’t just protect your future; it also grows your confidence as you get accustomed to managing your finances in good times and tough ones. But there are a few common mistakes that can derail your investment journey. Here are five mistakes to avoid as you begin to put your money to work, even in a volatile economy.

1. Lack of Diversification

Putting all your money into a single investment is a risk that even the most seasoned investors avoid. Diversification—spreading your investments across different assets or industries—is crucial to building a portfolio that can withstand fluctuations. By diversifying, you shield yourself from being overly exposed to a single market downturn.

In Nigeria’s current economy, consider balancing local investments with foreign ones or exploring a mix of stocks, real estate, bonds, and even digital assets if you’re comfortable with them. This way, if one sector faces setbacks, others might continue to perform well, providing your overall portfolio with some stability.

2. Ignoring Your Financial Goals

Investing without clear financial goals is like setting out on a journey with no destination. You risk losing your way or, even worse, quitting altogether. Start by clarifying why you’re investing: Is it for retirement? To build a safety net? Or maybe to save for a child’s education? Knowing your purpose will help you stay focused, even when markets are unpredictable.

Once you’ve set your goals, break them down into smaller, achievable targets. For instance, if you’re saving for retirement, set annual goals that gradually increase. This approach keeps you on track and gives you a sense of progress even when economic conditions are less than ideal.

3. Chasing Quick Returns

In times of economic instability, it’s tempting to go after investments promising fast returns. However, chasing quick gains can be risky, especially in a volatile economy. High returns usually come with high risks, and these “get rich quick” options often end in disappointment.

Instead, focus on investments that offer sustainable growth. They may not be as flashy or provide instant gratification, but they’ll provide a steady foundation to grow your wealth over time. Think of these stable investments as the strong, silent types—they may not double overnight, but they won’t crash suddenly, either.

4. Neglecting Risk Management

Risk management is crucial in any investment journey, but it’s especially vital when the economy is uncertain. Risk management helps you set boundaries to avoid significant losses. For example, set limits on how much of your portfolio you’re willing to allocate to higher-risk assets.

Also, consider the timeline of each investment. If you might need funds soon, avoid locking them in assets that require a long-term commitment or carry high risk.

5. Failing to Rebalance Your Portfolio

A strong portfolio at the start doesn’t stay strong forever. Market conditions shift, and certain investments may outperform others over time, creating imbalances. Regularly rebalancing your portfolio ensures you remain aligned with your goals and risk tolerance.

For example, if a particular stock has grown significantly and now makes up a large part of your portfolio, you might want to re-balance by selling some of it and reinvesting in other assets. Re-balancing helps you take profits on high performers and reinvest in areas that may offer future growth, helping you maintain diversification and minimise risk.

Investing in a challenging economy isn’t easy, but it’s possible—and often, it’s essential. Start small if you need to, and remember that even modest, consistent investments build strength over time.

The seeds you plant now might be small, but with patience and care, they’ll grow into the financial stability you seek. Let these strategies guide you through the end of this year, making each investment step count as you build a more resilient future.