1.     Buy Quality Stocks: When everything in the market is down, it indicates that good stocks are being thrown out with the bad. This is a good time to hunt for quality stocks that tend to recover quickly and get back on the growth track. Do your research well, as it is important at this point to keep your purchase of bad stocks at a minimum because when bad stocks decline, their price keeps falling and may never recover.

2.  Go for Dividends: Stock price is determined by buying and selling in the stock market (market activities), whereas dividend is determined by the company’s net income. When the stock price falls due to market activity, but the company remains robust, profitable, and pays a dividend, it can hedge your investment against market losses. This year kicked off with a flurry of companies announcing impressive financials and declaring juicy dividends.  MTNN, Airtel, Guinness, Nestle, and a slew of other companies in Nigeria have a history of paying dividends. Find out the full list of dividends declared in 2022. Buying high-quality dividend stocks can help you “weather the storm” and help to hedge against inevitable short-term downsides in the equities market. Click here to start buying dividend stocks. 

3.    Diversify Your Portfolio: A diverse portfolio can help you mitigate risk. If one set of stocks underperforms, the others can help boost your earnings. A sector rotation strategy could also help you avoid downturns in specific sectors. Adding exchange-traded funds (ETFs) to your stock portfolio can help you diversify and adopt a sector rotation strategy. Different sectors perform well at different phases of the economic or business cycle. For example, when an economy is thriving, companies that sell big-ticket items like cars, machines, high-tech, home remodeling, and other large purchases, as well as their stocks (which are known as cyclical stocks) do very well. However, when the economy appears to be sputtering and heading for a recession, the smart thing to do is to shift to defensive stocks related to consumer goods such as food and beverage (in the consumer staples category), utilities, and the like. 

4.  Buy the Dip: In a bear market, stock prices drop significantly. As earlier mentioned, quality stocks will always bounce back, so this presents an opportunity to buy at a low price. But what if you wish to buy a quantity you cannot afford? 

Use margins. 

Buying on margin means borrowing money from a broker to purchase stock. Consider this a loan from a broker to buy stocks that you otherwise could not afford, with the hope that your stocks will rise in value enough to pay back the loan plus interest. This facility can be risky but can also be a powerful tool if used right.  

5.  Invest for the Long-term: Remember that good stocks emerge from bear markets and are usually well-positioned for the subsequent bull run. So, don’t be so quick to sell a stock. The key here is patience. Short-term volatility does not matter for long-term investors. If you have many years until retirement, a bear market should not worry you. What you need to do is keep an eye on the company’s vital statistics (growing sales and profits, for example), and if everything appears to be in order, then hang on. Continue to collect your dividend and hold the stock as it zigzags into the long term.

2. Always Put the Future in the Mix:

It is funny how I totally ignored the future throughout the period when I was focused on looking rich instead of growing wealth. One of the proven ways to secure the future is to invest. Back then, I used to think that investing is for the rich and I was waiting to get ‘rich’ to start investing. I was wrong. You need to invest to get rich, and you can start with little money and grow from there.

3. Take Financial Planning Seriously:

Earning an income and spending without proper planning is like starting a business without a business plan. If you want to be on your way to reaching your financial goals, you need to be your own CEO. Have an annual financial plan and be consistent each month at budgeting, saving, investing, and earning more money.

Every three months, conduct a quarterly financial review to see what’s working and what’s not. Update your goals to account for life changes; Check your budgeting system; Check your progress towards savings goals; Check to see that your investment goals are on track.

Click here to register to attend this free investment review session for Q1 2022 and get recommendations for the first half of this year.

2. Put in the work: Don’t assume anything when investing. Be sure to do proper research. The very first and most important thing to do is to decide on what type of investment is right for you, based on your goals, risk capacity, and time horizons. Then, research the investment and the company. If you are buying a stock, you’ll need to gather the necessary materials to conduct research on the stock before you buy. This means documents like Securities & Exchange Commission (SEC) filings, the company’s most recent annual report, quarterly earnings reports, press releases, company presentations and reports, and financial statements. Click here to learn more about Stocks. If you intend to invest in Exchange Traded Funds (ETFs), watch this video to learn more about ETFs.

3. Verify the Company: Check on the SEC website to ensure the business is a registered financial advisor or stockbroker. Any business or person that offers or advises you about financial products must be a Securities and Exchange Commission license holder. Check the SEC website for the list of licensed capital market operators in Nigeria.