2019 has been a financially hard year for many and for South Africa. Investors in particular, have seen low returns in a high-risk (election) year after several lean years.
In financial climates like this, many panic and thoughts of losing money can lead to impulsively pulling out of investments.
In the words of Warren Buffett: “The investor of today does not profit from yesterday’s growth.”
Past performance is no guarantee of future returns. Stock investors sometimes closely watch how certain funds performed over the previous 12 months, then switch to higher performing funds thinking the following 12 months will be exactly the same.
However, it is important to stick it out. We need to resist acting out of emotion and impulse when it comes to selecting investment funds. It helps to gather all relevant information and really understand our goals, investment horizon and how the funds are affected before taking the jump.
A successful investment strategy needs a level head and requires due diligence to understand everything rather than pulling out at the first sign of danger.
Economies also move through seasons. In stormy seas, you don’t jump ship. This is different to discovering your own ship has a leak – Steinhoff or Enron, ‘ships’ with serious ethical problems, come to mind – this is about uncertain and unkind macroeconomic conditions and various headwinds that slow progress down. That’s stormy.
And in a storm, everyone’s ship is getting tossed and turned, however calm their crew may look. It’s about sitting tight and riding it out, the priority of stormy weather is staying safe and in the game.
The good news is, sooner or later, better conditions always come – and patience pays out.