Stanlib figures prove that investment patience pays
STANLIB, South Africa's largest unit trust company, has a sure-fire investment tip for the new wave of offshore investors - commit to the long haul and just watch the gains accrue!
According to Paul Hansen, STANLIB's director of retail investing, offshore investment flows are again gathering pace - and this time South Africas favourite collective investment company is hoping its "sticky money rather than skittish money".
Hansen adds: "Experience tells us that merely giving general advice about the value of long-term investment is insufficient. This time we are providing graphs and figures to demonstrate the year-by-year value of stickability.
"We believe some of the current inflow is 'hot' because our offshore funds have been doing so well, but we hope enough private investors get the message this time around that the way to make serious money is to put it to work over a much longer period."
After converting into rands, the MSCI World Index - the benchmark for global equity performance - is up an incredible 215 times in 26 years once dividends have been ploughed back.
Hansen adds: "In annualised terms over 26 years, that's a gain of more than 22% a year despite the 1987 crash, the bursting of the Japanese bubble economy in 1989 when Japan represented over 40% of the MSCI World Index and the subsequent fall of 80% in the Nikkei.
'It's also despite the 1990 Gulf War, the techno crash in 2000, the events of 9/11, the run of US corporate scandals and phenomenal rand strength in 2002, 2003 and 2004. These were huge blows to investor confidence, yet we still see tremendous wealth enhancement for those who stay in the market.
"The figures also confirm the power of compounding - achieving capital growth on top of capital and income growth and the huge benefit of reinvesting dividends."
Sticky money is smart money, according to STANLIB's retail investment team.
Hansen quotes the example of Warren Buffet and Sir John Templeton, both dollar billionaires who made their money from long-term investing in the stock market.
Hansen acknowledges that South Africans were legally prevented from enjoying the full, 26-year benefit of MSCI growth. Individual investors were first allowed to legally invest offshore only nine years ago, when the rand was at 4.50 to the US dollar and just before a string of currency and equity market reverses.
He notes: "It was not the most auspicious time, but even so the global stock market is up 193% in rands, or 12.2% per year. That's not a great return as yet because of all the negative goings-on in between, but it still represents a significant gain for such a highly volatile period.
"Going on previous experience, further gains are in store for those with the patience to commit to the long-term. If only South Africans would just stick with it!"
