Queasy markets and returns

So 2018 has dawned, holidays are over and there are more negatives than positives in our bank account. We have our new year’s resolutions and goals set. So time to review the last statement of the year and oh dear what happened?… 2017 was a good year for investment and retirement funds. Yes, this might be a puzzling statement when you look at the political turmoil that was being experienced all over the world. But, overall up until the end of November most statements had good returns, especially after the dismal events we have been through and the impacts of our different finance ministers. However, at the beginning of December the news broke of the Steinhoff saga and our markets experienced a significant loss over a few short days. The Steinhoff share tumbled over 91% in a matter of days. The impact of this event effected everyone who was in the market, those who actually owned the share as well as those who did not. Many of us stayed glued to the news tickers trying to understand how a company that seemed so invincible and had to be in every Investment house’s portfolio or else they lost out on returns, had suddenly been rocked by such a scandal. Next came the ANC elective conference and the markets went into an ever more extreme rollercoaster of up’s and down’s with everyone trying desperately to predict who would be the next president of the ANC. What would this do to our country and would we still have a market once the votes were counted? Suddenly, it was Ramaphosa, which calmed everyone and made the most anxious person look forward to a great summer holiday. The Rand strengthened and all seemed bright and shiny. So again you ask, then why are the statements we have received not reflecting this positivity? The answer is that before the December events most funds had offshore allocations to try and hedge against our political uncertainty. These allocations were driving the returns with the world economy starting to grow and providing a protection for the savings we had. However, with the sudden rapid strengthening of the Rand after the conference it has reversed all the gains these investments made in helping our funds ride through our bumpy year. Added to this is that a large portion of our listed companies have offshore subsidiaries and income streams which were positive but with the rand strengthening so significantly, the income received was far less. Add in the Steinhoff saga at the beginning of the month the December returns look horrid and very negative. These events in such a quick succession highlight why the core of all investment approaches is to ensure all funds are diversified between different types of assets such as equities, bonds, property as well as onshore and offshore investments. Understandably the above was more like a perfect storm and no matter how you invested you were not going to avoid any impact, but staying diversified did help soften the drop. Lastly, always remember the core principle of investing is sticking to the time period you have allocated to your investment. 1 month’s volatile return is not going to have an impact on an investment created for a 5 or 10-year period, however it will affect those who have a 1 to 2-year time horizon. Make sure you and your advisor chose the right risk profile and asset mix to meet your needs, goals and time allocations. The markets will turn and another news cycle will impact them in another way. There is no crystal ball which can predict what will happen next or how much you will or won’t make. Investment units go up and they go down, but regular and continual investing helps to reduce the risk, spreading your investment and diversifying the underlying assets will ensure the returns you are aiming for are achievable. Sticking to the time period and ignoring the noise and numbers that are being spoken about on a daily, weekly and monthly basis will help you meet the goals you have. Unfortunately, there are no guarantees in investing and what goes down, must come up. Speak to your advisor and stay the course. Enjoy 2018 and happy investing. Article written by: Joleene Webster


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