Investing tips in scary markets

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

Don’t make a mountain out of a molehill

Don’t be drawn into a spiral of negativity: it’s usually short term, since markets move from extreme to extreme.

Review your investment goals. Has the plan changed? Do you have time on your side? If yes, then there is a very good chance you’re still on track.

If your portfolio does not have sufficient global exposure, 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: either directly or through an asset swap fund.

Many South Africans have their funds tied up in retirement savings vehicles, which should be well structured along Regulation 28 guidelines. One has a few more options with discretionary savings.

Leaving your funds in cash is not a bad idea to protect capital in the shortterm, but don’t forget to make an asset allocation decision down the line and move into higher return assets such as equities.

There is a compelling argument to take as much money offshore as possible. However, when there’s bad news, great buying opportunities often present themselves.

With a little deeper research, investors can achieve fantastic returns from local shares.

Spreading risk and diversification

Diversification means you are not committing all of your capital into one asset class or geographic region but rather spreading the risk. South African investors have options to create global diversification without physically taking money offshore.

Asset swap funds permit South Africans to invest rands (in a unit trust fund based in rands) which give you exposure to global equities, global balanced funds and even global fixed income. There are also a number of exchange traded funds, listed in rand on the JSE, that give investors low cost offshore exposure.

Riding it out through the doubt

If one has a well balanced portfolio, spread across global asset classes and feel your fund manger(s) will work to navigate the global markets, then often in ‘tough’ times the best thing to do is trust the plan and stay the course.

Historically investors have destroyed value by chopping and changing funds to try to achieve better than market returns. This strategy more than often fails and if one had stuck it out with the original fund manager then things would have worked out just fine.

Markets move in cycles and not all managers deliver the same results but rather deliver different outcomes at different times in the cycle. Stay the course.

Murray Anderson is managing director of retail and commerce at Ashburton Investments