Kevin Caden | Director | Iza Wealth | mail me |
Two months into President Cyril Ramaphosa’s new government for the next five years, South Africans have been made aware of the stark reality of a higher-than-anticipated contraction in the economy in the first quarter of 2019. While the JSE all share index rebounded in June, it comes off a miserable month of May.
While investors may feel they have nowhere to hide from volatility, as the depressing local news plays out against a tough international environment, carefully balanced and well-researched portfolios focusing on exposure to hard currency global companies spread across a global geography are best placed to ensure long-term protection and growth of investors’ retirement savings.
Anxiety for local investors
It is not hard to understand why anxiety may be the order of the day for many local investors.
The dire state of state-owned enterprises, the urgent need for job creation and the continued revelations at the various commissions that have yet to result in anyone being held to account for rampant corruption, all play out against the backdrop of a local economy which is unlikely to grow anywhere near what is needed to address the country’s problems.
The local conditions play out at the same time as increasing tensions between China and the US, Brexit uncertainty continuing and heightened tensions between the US and Iran.
In addition to this, South African Equity markets were weighed down in May by emerging market underperformance as a result, in part, to the strain caused by the US announcement on proposed tariffs on Mexican goods and services. The JSE all share index was down 4,84% in May..
However, the bourse rebounded strongly in June with the all share index gaining 4,6% month-on-month, bringing the year to date growth back above 10% to 10,4%. This was mainly attributable to more global ‘risk on’ sentiment as a result of reduced global trade and macro tension along with Rand strength which saw the Rand reaching levels not seen in over six months.
Delivering returns over the long term
Carefully curated exposure to different regions and asset classes is a proven way to deliver returns over the long term.
Investors need to preserve their wealth, and grow it over the long term to ensure their retirement goals are met.
Investing must have a long-term view. As is increasingly evident, the world is dynamic and various geographies and regions are faced with different head and tailwinds. The complexity of global financial markets means that investors need to have an unclouded navigation system – investing for one’s retirement cannot be done based on biases or dogmatic ideologies.
Investing isn’t gambling. If you react to short-term swings you essentially lock in the losses. Beyond this, if you have all your eggs in one basket, you may find that you are not enjoying the protection needed against market volatility, such as when emerging markets come under increased pressure like what’s happening now.
Offshore investing gives those wanting to preserve and grow wealth exposure to hard currency and blue-chip companies they would otherwise not have access to.
Underpinned by strong research and a clear understanding of individual markets and regulations, well-balanced global funds are well-placed to dynamically stay the course and deliver long-term wealth preservation and growth.