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The in­ter­est rate cy­cle has en­tered an up­ward tra­jec­tory. Mohr notes that ris­ing in­ter­est rates tend to curb house prices, and the prop­erty mar­ket is typ­i­cally a buy­ers’ mar­ket.

“In such a mar­ket, a buyer should have a wider po­ten­tial range of prop­er­ties to choose from and more time to find a suit­able prop­erty.

“Po­ten­tial buy­ers must, how­ever, make sure that they are able to af­ford the in­creas­ing mort­gage pay­ments as in­ter­est rates could rise more than gen­er­ally ex­pected,” he says.

The Chi­nese story

Just as the drought has hit the coun­try hard, in­vestors can ex­pect a drought in the sense that the sources of re­turns have all but dried up, ac­cord­ing to a re­cent in­vest­ment up­date from the Old Mu­tual In­vest­ment Group. Old Mu­tual conservative fund man­ager John Or­ford says the on­go­ing tran­si­tion in China from in­vest­ment-led fast growth to slower con­sump­tion-led growth will have on­go­ing im­pli­ca­tions for in­vestors well into next year.

“We re­main cau­tious on the out­look for com­modi­ties and emerg­ing mar­kets as a re­sult and, in our view, ex­po­sure to the Chi­nese con­sumer is prefer­able to com­mod­ity-linked ex­po­sure to China,” he says.

“For ex­am­ple, Naspers, via its hold­ing in Ten­cent, of­fers in­vestors ex­po­sure to the rapidly grow­ing in­ter­net ser­vices in China and re­mains a core hold­ing in our port­fo­lios.”

With the rand in free fall, many in­vestors are pan­ick­ing and tak­ing their money off­shore. The key ques­tion is whether or not this is ad­vis­able.

Mohr says you should never make im­por­tant in­vest­ment de­ci­sions in “panic mode”.

“Hav­ing said that, in­ter­na­tional in­vest­ments should be part of any in­vestor’s port­fo­lio, be­cause such ex­po­sure re­duces the over­all risk of the in­vestor’s port­fo­lio and adds to the re­turn po­ten­tial.

“In­vestors should, how­ever, guard against tak­ing all their in­vest­ments off­shore af­ter a mas­sive rand de­pre­ci­a­tion. In the past, the rand has of­ten improved a bit af­ter a big fall.” How­ever, Mohr cau­tions that when you take money off­shore, it must be part of a long-term fi­nan­cial plan.

“In­vestors must also take into ac­count that many South African equities, such as Naspers and SAB, also pro­vide the in­vestor with in­ter­na­tional as­sets or in­vest­ments. You need to make sure that the in­ter­na­tional in­vest­ments make in­vest­ment sense.

“For ex­am­ple, when buy­ing equities, the val­u­a­tions must be at­trac­tive – in other words, not ex­pen­sive. Cur­rently, in­ter­na­tional cash in­ter­est rates are ba­si­cally zero and so in­ter­na­tional cash is not look­ing at­trac­tive, while equities and prop­erty of­fer bet­ter value,” he says.

Is this the time to go into cash?

Mohr says re­gard­less of what is hap­pen­ing in the mar­kets, you should not shy away from fi­nan­cial mar­kets.

“Over time, eq­uity and prop­erty mar­kets pro­vide the best re­turns. How­ever, in­vestors must not try to ‘time the mar­ket’ – i.e. jump in and out in the short term.”

Mohr says many stud­ies have shown how such tim­ing de­ci­sions de­stroy longer-term re­turns.

“It makes sense to buy into a di­ver­si­fied or bal­anced fund that in­vests across a range of as­set classes or in­vest­ments, lo­cally and in­ter­na­tion­ally.

“Fund man­agers will be mak­ing the un­der­ly­ing in­vest­ment de­ci­sions,” he says.

“Cur­rently, cash re­turns are barely bet­ter than in­fla­tion and, in the longer term, are un­likely to do bet­ter than a di­ver­si­fied or bal­anced fund.”

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