Earning passive income is every man’s dream. However, the year 2022 has been a year where major assets and investment vehicles have been posting negative returns. Now, coupled with worrying macroeconomic factors like inflation and an increase in cost of living, the value of money and purchasing power is slowly being diminished. This is happening at a time when many investors are taking a backseat on risky assets as market selloffs continue to intensify.
Although the markets are down, investing during bear market seasons is still the way to go, when it comes to building wealth. Yes, it might be very scary, especially when you hear about your favourite assets losing over 50% year-to-date (YtD). However, according to Warren Buffet, bear markets are the best time and opportunity to buy good companies at reasonable prices.
Buffett’s philosophy has been to identify fundamental value in a company’s long-run competitive advantage, along with several more specific criteria. As a result, a bear market can be seen as an opportunity to acquire valuable companies’ stock when their stock is on sale.
The question now remains as to where money should flow into in other to earn passive income. To speak on this, Nairametrics sat down with Opeoluwa Dapo-Thomas, the founder and CEO of Perth Partners, a financial consulting company, to answer the question on everyone’s lips.
What are your thoughts on the current Macroeconomic situation in Nigeria and around the world today?
Well, it’s a bit bleak if we are being honest. Surging oil prices are not reflecting on the country’s economy. Oil accounts for 80% of the country’s dollars but import-dependent Nigeria is struggling to provide dollars for everyone. So, costs get higher, companies hire less leasing to unemployment and purchasing power declines. The country’s debt payments have exceeded revenue. That would affect the macro-economy, and if the country is experiencing all these issues with oil at these prices, then there is no light at the end of this tunnel.
A lot of asset classes have experienced significant declines in 2022. What do you think is the major cause of this?
Well globally, investors are looking for safer options and that’s why you see the dollar surging. With interest rate going up in the US, risky assets are dumped and the public and private equity markets suffer the biggest losses as well as the cryptocurrency markets. Inflation is still the albatross on the neck of central banks worldwide but the situation is a bit sticky because energy prices are rising as a result of the Ukraine Russian crisis – meaning that the global economy is suffering from two things. One is the excess liquidity provided during the pandemic and the commodity supercycle we are in. So, it’s 1970 again.
Have the actions of policymakers helped the investing scene in 2022?
Well, not everyone has experienced a pandemic and a war back-to-back before, so policymakers are in new territory. They’ve tweaked around fiscal and monetary policies but those are not magic wands. They are structural issues beyond their control.
There have been a lot of mixed feelings about cryptocurrencies and crypto-related stocks. What do you think about the industry and what are your projections?
The riskiest assets of them all. High potential for returns but the Sharpe ratio points to volatility which might affect investors’ appetite. I think the market is still maturing but the lack of regulation is worrying with the number of hacks and rug pulls we see everyday. There are other use-cases for cryptocurrency, that still makes the industry relevant. The jury is still out there for global adoption.
Now to speak on the elephant in the room, where should one invest today?
Personally, I want to invest in a private boat charter somewhere in Europe to recalibrate and prepare for the coming months. You know, an investment in yourself always pays the best interest. The other possible investment options have risk elements but great potential. One, Commodities are still pointing higher, so waiting for major pullbacks before pulling the trigger.
The second one is dollar-cost averaging on an SP500 index fund because I think it’s at a discount now. There’s possibly still more downside, hence my choice for DCA, but “time in the market always beats timing the market.”