Old Mutual’s warning to South African investors

South Africa down

Old Mutual has warned investors not to act hastily and withdraw their investments due to the uncertainty surrounding the outcome of South Africa’s national election. 

The insurer and asset manager advised investors to maintain resilience in their investment strategies and resist making hasty decisions driven by short-term market fluctuations.

Chief economist at Old Mutual, Johann Els, said that investors must prepare for potential market swings across various asset classes due to the elections. 

“Political transitions breed uncertainty, often leading to heightened market volatility,” he said.

“However, looking at historical insights from political shifts in financial markets, markets tend to stabilise, and investors may notice a return to more predictable patterns.” 

Head of advice at Old Mutual, Lizl Budhram, said this fact emphasises the importance of maintaining a long-term perspective when markets respond to bad news. 

She said that when investors act hastily and sell off their assets during a market dip, they often lock in their losses, which might have been recovered had they held onto their investments.

“Staying invested, on the other hand, allows investors the potential to participate in the market’s eventual recovery, which historically follows most downturns.” 

Moreover, the opportunity cost of exiting the market can be quite substantial.

“When investors sell their investments during a market dip, they are essentially selling their assets when the market values them at their lowest, often not receiving their true value.” 

“They then move this money into safer but less profitable investments, such as cash, because they’re worried.”

“This decision then locks in their losses and also means they could miss out on making more money later when more profitable opportunities come up.”

Here’s what to do instead, according to Budhram –

Focus on the long-term goal

“While short-term fluctuations may cause concern, long-term growth prospects often overshadow them,” she explained 

“Maintaining a clear understanding of one’s risk tolerance and investment objectives is essential to weather the market volatility storm.” 

Budhram emphasised the significance of different time horizons in financial planning, delineating short-term immediate financial needs, medium-term 5-year goals, and long-term goals with 10-to-40-year time horizons.

“The long-term focus will lead to diversification as a critical strategy for managing risk during market volatility.” 

“By spreading investments across currencies, asset classes, and geographies, investors can mitigate the impact of adverse market movements.”

Revisit your investment plan for your peace of mind

Budhram said it is vital for investors to have an ‘anchoring’ conversation at the outset of embarking on a long-term financial strategy and to have regular check-ins with their financial advisor. 

This should instil confidence and foster a disciplined approach to investing, with clear goals and methods of achieving those objectives. 

“It’s also important, in times of uncertainty, to circle back to this plan for peace of mind that you’re on track,” she advised. 

Seek guidance when approaching big milestones

Budhram also advised investors experiencing significant life events during this volatile election cycle, such as retirement or funding education fees, against pre-emptive decisions based on election expectations. 

“History has shown that outcomes often defy predictions, highlighting the importance of remaining rational and focused on your long-term objectives.”

However, accessing savings during this period could have detrimental effects on the long-term performance of an individual’s investment. 

Find a soundboard before making any financial decisions

While the temptation to react impulsively to short-term market movements persists, Budhram cautioned against such behaviour. 

“Emotional responses can cloud one’s judgment and lead to detrimental decisions,” she said. 

“This is where the role of a financial adviser becomes crucial. Advisers serve as calm voices of reason, guiding investors through turbulent times and encouraging adherence to their long-term plans.”

“Before making any financial decision in response to the national election, reach out and speak to a financial adviser.” 


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