Investors have contended with Brexit (the UK giving formal notice to leave the EU), the election of Donald Trump in the US and, locally, a Cabinet reshuffle last week that was followed by S&P Global’s decision to downgrade South Africa to “junk” status. However, in the midst of all this political turmoil, the key is not to panic and switch investments if they are performing poorly because of these shocks. Switching when you are emotional could lose you money.
Dave Mohr, a chief investment strategist, and Izak Odendaal, an investment strategist for Old Mutual Multi-Managers, said: “Such events always evoke strong emotions, even among seasoned investment professionals. But making investment decisions based on emotions is almost always the wrong thing to do.”
They added: “The best defence is appropriate diversification. It might feel safer fleeing to cash or taking all your assets offshore, but such concentrated, fearful portfolios typically do not deliver the desired outcome over time.”