As the market volatility occasioned by COVID-19 pandemic persists, finance and investment experts at Sigma Pensions have advised investors to diversify their portfolios in order to reduce risks.
It said this in a statement titled ‘Sigma Pensions advises investors on market volatility’ on Friday.
The statement said the Chief Investment Officer, Sigma Pensions, Mr Pabina Yinkere, gave the advice while speaking at a webinar titled, “Big future, little steps – The power of diversification,” organised by the firm.
According to Sigma Pensions, the webinar was organised with the aim of educating attendees with skills/actionable advice from professionals on personal finance diversification, choosing investment instruments and pension fund diversification.
In his presentation titled, “Hedging pension funds against market volatility,” Yinkere noted that 2020 was a peculiar year, especially for investors, as the financial markets were impacted by the COVID-19 crisis.
He said, “When you are faced with a volatile market, do not panic; read the situation well, understand what is going on and where necessary, reduce risks.”
Yinkere also advised investors dealing with market volatility to cushion portfolio with assets that gave accrual income and look for opportunities in the chaos, adding that “There is gold in dirt.”
The Sigma Pensions chief investment officer, who pointed out that volatile assets were usually considered riskier than less volatile assets because their prices were expected to be less predictable, encouraged investors to pay close attention to the management of their pensions.
In her contribution, the Vice President, Global Markets at Parthian Partners, Mrs Ola Oladele, stressed the importance of investing.
While noting that all investments provided rewards in one form or the other, she said, “For each type of investment, there are always risks.”
She mentioned inflation which, according to her, had greater risks for debt than for investments in equities.
The financial expert advised investors to always ensure that their portfolios were sufficiently diversified in order to minimise the risks of unexpected losses.
“Diversification is simply not putting all your eggs in one basket; you diversify to minimize the risk of loss to your overall portfolio,” she stated.
She also pointed out that diversification of their portfolios would expose investors to ‘more opportunities for returns; safeguard against market cycles and reduce volatility and heart problems.”
In his presentation, the Chief Executive Officer and Co-founder of Cowrywise, Mr Razaq Ahmed, stressed the importance of financial education for investors.
According to him, of all the requirements that made for successful investment, financial education was probably the most important.
He said, “the fact that you are taking risks is not enough; it will depend on the nature of the asset class. You still need to have a basic knowledge of the asset class.”
He also stressed the importance of investors diversifying their portfolios, noting that no one had a crystal ball by which to determine when an investment would bring in the expected returns.
He, however, cautioned that in diversifying their portfolios, investors should ensure their investments are not correlated.
“For instance, if you are working for an oil company and you buy only oil and gas stocks, if anything negative happens in that sector, you will lose everything,” he said.