Stay invested despite market uncertainties
27 January 2014 | Investments | General | Ian Anderson, Grindrod Asset Management
Investors are currently faced with a number of short-term uncertainties and the temptation to alter asset allocations to lock in profits and prevent capital losses is now higher than usual.
Many investors are tempted to make changes to their investment portfolios as economic or financial market conditions change. For most, these changes have a detrimental impact on their long-term investment objective, as changes usually involve selling growth-oriented assets and buying non-growth assets likes short-dated bonds or just sitting in cash.
Investors with longer-term investment horizons need to be reminded that the South African equity market has consistently provided inflation-beating returns over rolling 10-year periods since 1970. The market is expected to continue doing so in the future.
It is very difficult to time markets, given the myriad of uncertainties that dictate their path in the short term. It’s a lot easier to determine what markets are going to do over longer investment horizons and it’s on the basis of these long-term expectations that most investment portfolios and financial plans are constructed. Over emphasising and acting on short-term ‘risks’ or ‘opportunities’ can lead to investors straying from their longer-term objectives.
