It has been dubbed the "coronavirus crash" - one of the steepest and deepest two-week declines the stock market has ever experienced. The extreme market volatility we are now experiencing can be daunting, to say the least. Throughout history, the market has favoured investors who have had the patience and discipline to stick with their investment strategies, even in the face of severe stock market declines. This is due to large recessions almost always being followed by flourishing booms - with greater market gains over time. It is critical to not panic.
This is clearly a very difficult time for people and businesses, but we need to be open to the opportunity it presents investors who have access to investable cash. As such we have both a local and offshore investment strategy in place for investors who have access to Investable Cash. Both strategies follow the same phasing in structure, just different procedures and into different funds.
As a way of example, if you have R100,000 to invest, we are investing in lots of R20,000 over 5 months.
Our fund selection for local investments are the Allan Gray Balanced, Investec Managed and Coronation Managed.
For direct offshore we are using the Sarasin Global Dynamic, Investec Global Managed and Orbis Global Balanced.
The procedure for both is to allocate the funds into the Allan Gray Money Market Fund (approximately 7% per annum interest) and phase into the above funds. The offshore strategy takes a lot of administration, as we have to do manual disinvestments and allocation, but we have the systems in place to do this electronically.
As concerning as it is, we have lived through some very turbulent times over the past four decades, including:
- Black Monday stock market crash in 1987,
- Terrorist attacks on September 11, 2001,
- Multiple disease outbreaks (SARS in 2002-2003, avian flu in 2006, Swine flu in 2009, Ebola in 2014, Zika in 2016, among several others) and
- The 2008-2009 global financial crisis and the Great Recession
These events triggered severe market shocks that lasted for months or years. Yet, during this time from 1980 to 2019, the S&P 500 index has posted an average annual return of 11.8%. The global markets also demonstrated their resiliency during that time, with the MSCI World index posting an 8% average annual return and the MSCI Emerging Markets index posting a 10.7% average annual return.
It is important to remember that, without risk, there are no returns. In this environment, if you move your money into cash, you are likely to miss out on the best gains in the market, making it much more difficult to recover your losses. Now more than ever, it is essential to follow the basic tenets of investing. Investors should stay diversified and remain focused on their long term objectives as those do not change with market fluctuations. Lastly, they should stay calm even though the media noise can be deafening.
Please contact us should you have R100,000 or more to invest.