Think long term — and stay the course
• Investors should resist the temptation to make a quick buck but rather formulate a plan and stick to it
Current conditions in SA confirm once again why it is so important for investors to have well diversified portfolios. As Jeanette Marais, director client services and distribution at Allan Gray, points out: “If you have chosen the right fund with a long-term track record of performing through the cycles, or created a portfolio that is well diversified across currencies and asset classes, you should try not to panic despite the prevailing mood of uncertainty.
“With that in place, you should guard against acting emotionally during times like these. Rather try to make longterm decisions about what is right for your portfolio and stick with these. Recent events emphasise the need to keep a clear head and not panic.”
She says the cabinet reshuffle and the circumstances surrounding it emphasise the value of setting in place a longterm investment plan and strategy, well in advance, that is sufficiently robust it can cope with any events that occur, because they will happen.
“If you have done that, you should be able to sleep at night,” Marais says.
She says with a good investment plan in place investors need to sit back and trust their fund managers to do the job they were selected to do in the first place.
STRATEGIES
Another key is time. Fund managers often develop strategies that take time to unfold and if investors second guess that strategy and do not give fund managers time, they can end up destroying a lot of value.
“There is no point in having a good plan and then reacting counterintuitively when for a week or a month that plan does not appear to be working.
“You can re-examine your plan to ensure that it is solid but do not make kneejerk changes that will cost you money in the long term,” Marais says.
She notes that in the past South Africans have had a habit of waiting for the rand to tumble and then investing their money offshore and when the rand strengthens they all too often bring their money back to this country. In other words, many people have been buying expensive and selling cheap.
However, Marais says it appears that an increasing number of South African investors have got the message that this behaviour works against their financial wellbeing.
“Our offshore investment book has grown significantly over the medium term and this illustrates that more people are developing long-term investment strategies and then following them.
“They are recognising they need to build more offshore exposure into their portfolios.
“Our rand-denominated offshore funds reopened about three weeks ago because we got some additional capacity and it was encouraging that clients moved to take advantage of the opportunity to increase their offshore asset holdings while the rand was strong,” Marais says.
Janina Slawski, director of marketing and distribution at Old Mutual Investment Group,
IN THE BEGINNING, FIND SOMEONE WHO IS A GOOD FINANCIAL ADVISER AND THEN FOLLOW THE ADVICE THAT THEY GIVE
says the rand could move up or down depending on how current events play and Old Mutual’s portfolio managers are mainly taking a neutral stance.
“While it is a good time to be questioning the investment decisions one is making, in general the average investor should simply stay the course and stick with a well thought out investment strategy.
“They should be making long-term investment decisions and not making any changes and snap decisions based on short-term events. Make good long-term decisions and then stay the course,” Slawski says.
She says there is a strong move towards Regulation 28 investing (investments that comply with pension fund investing requirements), updated advice models.
“This is taking place in the light of retirement reform as well as the Retail Distribution Review (RDR). The average investor should be taking good advice and investing for the long term and sticking with their plan. They should resist the temptation to make a quick buck and put their money into something that will not stand the test of time,” Slawski says.
TRUST
She says this view supports one of the strongest trends being seen in the asset management industry, namely the need for people to trust their advisers and investment managers and to invest for the long term.
“Right in the beginning you want to find someone who is a good financial adviser and then having picked out a good professional you have to follow the advice that they give.”
She says as an asset manager Old Mutual Investments has a range of portfolios covering areas such as specialist equities, bonds and offshore, as well as multi-asset class investments.
“Generally, we see strong support for multi-asset class investments,” Slawski says.