Investing: look beyond the current noise
World-wide economic uncertainty and a changing political scenario in South Africa are causing many people to lose investment focus. Couple these factors with high inflation and interest rates, as well as the resultant reduction in disposable income, and South Africans find themselves questioning the wisdom of long-term investing. In spite of this, Allan Heynen, director, BDO Spencer Steward Financial Services (Gauteng), maintains that current market conditions are ideal for investment and that individuals should make the most of the opportunities they afford.
Opportunity: something the world’s most astute investors are currently seeing in economies all over the globe. And something each of us as South Africans should also be recognising and taking full advantage of – despite global market pessimism and widespread panic being voiced by the more conservative among us. The reason? “Average” investors now have access to investments from which they were previously excluded by virtue of their budgets. With the markets knocking off some 20 to 30% off what can still only be described as “excellent” investments, there has potentially never been a better time to invest, sit back and let your money work for you.
Having this type of “long-term” vision or view of one’s investments is critical in the current economic climate. This allows one to look beyond the present noise and see the end goal: effectively maximising one’s return on investment in the years that lead up to retirement. If one’s objective is to maximise long-term capital growth – the situation facing most young investors – one is currently faced with the equivalent of what amounts to an “end of season” sale: high-end, quality items you previously couldn’t afford are now yours for the taking. This is because stocks and shares of reputable, well-established companies have been adversely affected by worldwide events, effectively dropping in value and making them “bargains” for the average investor. Buying now at this reduced rate with a long-term view will allow you to reap the benefits of this excellent investment in the years to come when markets have recovered.
It must be noted too, that as South Africans we have an added advantage at the moment. This is thanks to our economy being insulated to a certain extent from a number of these global threats. Exchange control and other factors have effectively prevented local money from being invested in a number of the riskier companies that have subsequently crashed. Local companies are also not facing the subprime issue. That being said however, excellent local companies have been affected by the global downward spiral, making it an ideal time for the astute to redirect money into these local, less risky investments. In addition, with more South African companies diversifying (meaning that there is a Rand-hedge to their shares) there’s arguably never been a better time to buy good local shares.
That being said, however, everyone’s financial circumstances and needs are different and one’s investment decisions should be made in consultation with a qualified financial planner. They will ensure that you not only receive the correct advice when it comes to identifying “wise” investments, but that these are aligned with both your risk profile and long-term goals.
The trick at the moment then – apart from working with your financial planner to identify opportunities that are a good investment – would seem to be avoiding the widespread panic and hysteria that is currently dominating the investment markets. Markets have up and down cycles; one has to both acknowledge and anticipate these. By remaining focused on your long-term plan however, and redirecting some of your investment into quality “bargain” options, you will not only ensure you weather the current noise in the most productive and savvy way possible, but are also able to create a little of your own noise in later life.
