Finding the positive in a tough investment market

COVID-19 entered our lives without warning and for some, drastically affected long term goals and savings. The virus has sent shockwaves through the investment world, causing volatile fluctuations last seen during the 2008 Global Financial Crisis (GFC).

“Long term investing, and saving is the ability to beat short term market fluctuations, with long term goals and growth in mind” says Aneesa Razack, CEO share Investing, FNB Wealth and Investments. “Both discipline and bravery is required to stand strong in times like these and stick to investment strategies and goals”.

She explains that, “In times of hardship, opportunities always present themselves”. The large decrease in share prices, have given investors the opportunity to buy some of South Africa’s top companies at drastically discounted prices. “An error that must not be made, is to sell assets at significantly decreased prices, and re-enter the market at a later date when prices have stabilised”. This results in buying high and selling low and does not form part of a long-term investment strategy.

The lockdown period has given South Africans a chance to re-evaluate what is truly important to them, from current lifestyles, family and professions, to investment and retirement outlook. The importance of having savings was made clearer by the pandemic. “All of a sudden cars, watches and expensive clothing lost their appeal, as these items went unused in the last two months and emergency savings is key for those who are not earning an income” explains Razack, a realisation that might hopefully encourage our beloved country to a culture of more saving rather than spending.

Another opportunity presented in this time of difficulty, is the reduction in the prime lending rate. This has been done to incentivise spending in the economy. “Investors need to see this as an opportunity to increase contributions to savings and investments as well”. Reductions in monthly interest expenses mean, South Africans have additional funds and the opportunity to invest, accelerating long-term goals. She explains “With the combination of discounted asset prices and additional monthly contributions, lost ground can be made up quickly.”

FNB has seen an increase in share trading activity as well as the education and research uptake of its customers. Razack explains that the reason is that “customers are taking advantage of the current opportunities and hungry for information and research on current and possible investments.” Industries are changing, lockdown levels affect companies differently and post the virus companies will have to adapt or fade away.

Investors are realising the importance of fully understanding what they are invested in and how diversifying investments can help reduce losses when the next crisis occurs. Diversification is something that can be easily forgotten in a bull market as prices continue to rise. In a crisis however, cracks in a portfolio are magnified. “Investing in assets that move in opposite directions to the market like gold have shielded investors from losses and can be adopted by investors in preparation of the next crisis,” explains Razack.

Although the virus has affected many long-term goals, the opportunities and lessons created have given investors the ability to become better investors and savers. The below steps summarise how to channel the positive and put long term goals back on track:

1) Stay invested. Selling low now and buying higher later will further set back long-term goals.
2) Take advantage of reductions in expenses such as interest and increase monthly contributions to accelerate long term goal outlook.
3) Look for opportunities, assets are for sale at affordable prices and buying the right investments now will mean future sustainable returns.
4) Understand your investment and savings portfolio and constantly revisit diversification strategies. Investing in multiple assets will assist in spreading portfolio risk reducing exposure to the next crisis.
5) Educate yourself and take advantage of the research and education material FNB has to offer. Understanding different investment and savings vehicles will help to identify further opportunities.