It has been a tumultuous year both globally and locally, with most South Africans increasingly anxious for the future.
However, given that local markets have picked up substantially since June 2017, is the situation really as dire as most would suppose?
That was the question posed by Elize Botha, MD of Old Mutual Unit Trusts, when she welcomed guests to the recent Financial Mail Private Lounge, presented with Old Mutual Wealth. The focus of the event was understanding the psychology of retail investors and managing client expectations in the so-called “low-return environment”.
While South Africa has been bombarded with a number of challenges in the past year, including a credit rating downgrade, investors should not give undue concern to the idea of a low-return environment, said Dave Mohr, chief investment strategist at Old Mutual Wealth.
He agreed that while these were uncertain times, financial advisers who kept focusing on the low-growth environment risked alienating retail investors. Current market returns were not abnormal, he said, arguing instead that abnormally high returns, or outsize returns, were the real abnormality
“The South African equity market is currently up 20% despite local political noise,” Mohr said, adding that it was dangerous trying to time the market.
He also said it made sense to invest a percentage of one’s portfolio offshore – but probably not everything as some financial consultants advised.
“If you are an equity investor, you need to have patience. The bottom line is that equities are risky unless you’re prepared to invest for the longer term,” said Mohr.
While it had been hard to persuade people to stay invested in the first half of 2017, had they exited the market, they would have missed out on the rally that took place since June, he said.