THREE VITAL IN­VEST­ING PRIN­CI­PLES TO RE­MEM­BER IN SCARY TIMES

Cape Argus - - MONEY - MUR­RAY AN­DER­SON Mur­ray An­der­son is man­ag­ing di­rec­tor, Re­tail and Com­mer­cial, at Ash­bur­ton In­vest­ments.

SOUTH African in­vestors are ner­vous – and for good rea­son.

With a slug­gish econ­omy and weak rand, wor­ries over un­cer­tain land ex­pro­pri­a­tion poli­cies and fears that the of­ten mar­ket-lead­ing US stocks are set for a cor­rec­tion, many peo­ple are won­der­ing if they should sell up or stop in­vest­ing.

Peo­ple should avoid be­ing “fair weather in­vestors” and fo­cus in­stead on three time-tested guid­ing prin­ci­ples for suc­cess­ful in­vest­ing.

(1) Don’t make a moun­tain out of a mole­hill

South Africans have ex­pe­ri­enced low to no re­turns from the JSE over the past few years and are cur­rently fac­ing yet an­other bar­rage of neg­a­tive news. It’s im­por­tant to not be drawn into a spi­ral of neg­a­tiv­ity, which is usu­ally short-term in na­ture, since mar­kets move from ex­treme to ex­treme.

At times like these the best ac­tion is to re­view the goals you were in­vest­ing for. And for most peo­ple that goal is a com­fort­able re­tire­ment. Ask your­self whether the plan changed and if you have time on your side. If the an­swer is yes, then there is a very good chance you are still on track.

If your port­fo­lio doesn’t have suf­fi­cient global ex­po­sure, then it is best to sit down with your fi­nan­cial plan­ner. How­ever, you don’t want to be rush­ing to the door when the rand is at ex­treme lev­els. Con­sider wait­ing for an ap­pro­pri­ate level to take money off­shore.

There is a com­pelling ar­gu­ment to take as much money off­shore as pos­si­ble. How­ever, when there is bad news all round, great buy­ing op­por­tu­ni­ties of­ten present them­selves un­der our noses. With a lit­tle deeper re­search in­vestors can achieve fan­tas­tic re­turns from lo­cal shares. So, don’t be scared off by all the bad news and go off­shore and buy po­ten­tially ex­pen­sive as­sets.

(2) Spread­ing risk and diver­si­fi­ca­tion

It is said that the only free lunch in in­vest­ments is diver­si­fi­ca­tion. Diver­si­fi­ca­tion means you are not com­mit­ting all of your cap­i­tal into one as­set class or one geo­graphic re­gion but rather spread­ing the risk to help smooth out the path to achiev­ing a fi­nan­cial goal.

In­vestors in South Africa are for­tu­nate in that they have op­tions to cre­ate global diver­si­fi­ca­tion with­out phys­i­cally tak­ing money off­shore.

As­set swop funds per­mit South Africans to in­vest rand (in a unit trust fund based in rand) which give you ex­po­sure to global equities, global balanced funds and even global fixed in­come should you wish. Speak to your fi­nan­cial ad­viser or if you feel you want to be a DIY in­vestor there are a num­ber of great on­line sites from the main­stream as­set man­agers that will en­able you to ex­e­cute your diver­si­fi­ca­tion strat­egy. There are also a num­ber of Ex­change Traded Funds (ETFs) which are listed in rand on the JSE and give in­vestors low cost off­shore ex­po­sure. (3) Rid­ing it out through the doubt If one has a well balanced port­fo­lio, spread across global as­set classes and you feel that the man­ager(s) you have al­lo­cated your funds to will work to nav­i­gate the global mar­kets, then of­ten when times are per­ceived to be “tough” the best thing to do is trust the plan and stay the course.

Ride it out through the doubt.

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