Nishaan Desai – Divisional Executive: Investment Portfolio Solutions at Liberty
When the world went into lockdown in 2020 as the extent of the COVID-19 pandemic became clear, most markets plunged to depths not seen since the 2008 Global Financial Crisis.
The difference this time was that markets quickly recovered. In South Africa the JSE Top40 Index was testing new highs in early 2021.
With the benefit of hindsight we know the 2008 crisis was followed by a period of strong global economic growth, starting in June of 2009. This led to the longest bull market in US Stock Market history, and the US S&P 500 index produced 13% annualised earnings growth in US Dollar terms during this 11- year period according to Goldman Sachs. Those who switched out of their investments during the 2008 crisis missed out on the subsequent growth.
To be fair, there are still analysts who question the true strength of the current recovery – is it a reflection of improved economic activity, or is it a function of government stimulus actions propping up asset prices? This being said, growth in the long-term is something that is also a certainty if you look at the figures over time, the key here is to stay invested come what may.
A sudden decline in the markets is not a reason to disinvest. Countless financial market failures have been followed by periods of unprecedented economic growth and wealth creation. Selling during a heavy fall may seem natural given the fear of losing, but is only betting against the long-term odds. The market’s performance should be judged over relevant timelines of five years and longer. This is why professional investors stay focused during the inevitable cycle through bull and bear markets.
Obviously, it takes some willpower to stay positive and hold a long-term perspective. Staying the course with your long-term investment strategy means keeping your eye on the prize and not letting emotions like fear change your course of action.
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Experienced investors will tell you that trying to time the markets is a perilous strategy when you’re looking to keep up with long-term goals. Missing a few days of market performance can substantially reduce your overall investment return. If you give in to the temptation to disinvest as soon as the market goes through a seasick patch, you may just miss the crucial number of large positive months typically following a bear market.
Never have there been more opportunities on offer for investors to choose from as the global economy becomes more interconnected. This can be confusing in a world where some are even advocating cryptocurrencies as a home for your life savings. Going at it alone can be overwhelming; choosing what to invest in and when, without truly understanding the possible outcomes can be scary when it’s your own money that is involved. We know that planning for your future should be taken seriously. We want to help you to achieve your goals, whether short or long term, by guiding you on your journey with personalised financial coaching.
We have built a goals-based investing tool that is simple and that creates easy-to-understand investment proposals. It includes five multi-strategy investment portfolios. Each portfolio has been designed to deliver on performance and combines a diversified set of carefully selected uncorrelated strategies to ensure the best outcomes for you through different market cycles.
Your adviser will help you identify and match the right portfolio to your goals and objectives. By understanding what you want your money to achieve, your adviser will create a personalised plan to help you reach your goals.
Life doesn’t follow a straight line. With regular goal reporting and feedback, you can adjust your investments accordingly. The benefit of this process is that, should your goals or circumstances change, let your adviser know so they can change the choice of portfolio by simply switching to a portfolio more aligned to your revised goals.
As the COVID-19 pandemic has shown, there are no guarantees that the future will resemble the past, but history tends to favour long-term investors. Our multi-strategy portfolios have been designed to deliver on performance and combine a diversified set of carefully selected uncorrelated strategies to ensure the best outcomes for you, in the way that you have chosen. New opportunities could even surface amidst the chaos and crisis. Your future self will thank you.