CardinalStone Securities, a trading firm has stated the need for investors to invest in stocks for long-term purposes to protect portfolios and hedge against inflation amidst economic uncertainties.
Mrs Elile Olutimayin, Managing Director, CardinalStone Securities, gave the advice in a statement, on Tuesday in Lagos.
Olutimayin explained that her advice was because companies with pricing power could adjust their prices in response to inflation, thus preserving their fundamental value.
According to her, inflationary pressures has strained consumer wallets, increased the cost of living, and invariably pushed more Nigerians below the poverty line in view of the August inflation rate of 20.5 per cent.
This, she said, would impact on the value of investments.
She noted that the latest inflation figure suggested that to maintain the value of one’s investment, one would need to earn a return of over 20 per cent.
Olutimayin stated the need to diversify one’s portfolio to include asset classes which mostly correlated positively with inflation such as commodities and real estate.
“For context, with current global inflation largely driven by higher commodity prices, commodity exposures can provide a necessary hedge to investors.
“Likewise, rentals and lease income tend to increase as inflation rises, as does the value of the real estate property.
“There is the need to maintain a long-term view, as it is widely acknowledged that investors have a greater chance of beating inflation over longer horizons.
“For context, instruments like stocks tend to be more volatile over the short term, increasing their riskiness.
“Likewise, the relative illiquidity of real estate investments makes a long-term position more appropriate,” she said.
