How to invest in 2024

Navigating the investment landscape in uncertain times can be challenging, but some investment strategies still perform well despite the current global market turbulence.

This is the view of Investec’s head of investment distribution and intermediaries, Ebeth Van Heerden, and portfolio manager at Investec Investment Management, Paul McKeaveney.

The South African market has been under considerable strain. Global insecurity, the country’s persistently weak economy, load-shedding, infrastructure issues, and election uncertainty have dampened investor appetite.

Despite current global market turbulence, McKeaveney and Van Heerden encouraged South Africans to consider foreign investments. 

“We think that investors should have a decent allocation to offshore investments across their portfolio,” McKeaveney said.

“You cannot access the opportunities offshore markets offer relative to South Africa. It also offers a diversification advantage in having those assets offshore.”

The decision to externalise your portfolio needs careful consideration. The timing and currency of your investments are important factors impacting your overall return.

They also expressed optimism about the local market. 

Peregrine investment analyst AJ Snyman said uncertainty in South Africa has been especially high over the last six to eight months. “Most investors think the future doesn’t look all that pretty,” he said. 

This has also been reflected in the JSE, which is at a 30-year low as many companies decide to delist and seek funding elsewhere.

However, several of the country’s biggest problems, including Eskom and Transnet, are being addressed, and experts have said they are hopeful about South Africa’s economic performance going forward. 

“While offshore investments remain a very important building block in our funds at the margin, we think that South Africa might have some more investment tailwinds, while offshore might be facing slightly more headwinds,” McKeaveney said.

“So, for the first time in a long time, we’ve actually been looking to bring back some of our offshore assets and some of our multi-asset strategies.”

Ebeth Van Heerden

Patience in investing

Investing can be quite difficult for several reasons, Van Heerden explained. 

“The first one for clients is that the stock market feels risky and uncertain, and human behaviour generally shies away from fearful situations,” she said.

The stock market is filled with noise, she said. “There’s an overload of information available for investors around what drives economic growth.”

On top of that, deciding where to allocate your capital can be overwhelmingly complex. 

“And then we haven’t even touched on the fact that all of this is incredibly time-consuming, and ordinary investors think that they need to stay on top of all of these things.”

In times of uncertainty, investors get fearful and have their hearts rule their heads, Van Heerden said. 

On the one hand, there’s the fear of losing out. Investors may fear missing out on a new investment trend in the market and end up rushing into something that has already gone up in value a lot and buying it at a very high price. 

“That could be very destructive investor behaviour,” she said.

On the other hand, there is panic selling and investors’ fear of losing money. She used the fluctuating rand value as an example. 

The rand has strengthened recently, and many investors are asking if it is a good time to move their money offshore. This is a big shift from a few months ago when clients saw the rand weakening.

When the currency weakens, some people might want to sell their rands for a different currency that’s doing better. “I’m going to sell something that’s going down to buy something that’s going up in value that is already overinflated in value,” she said.

Ultimately, that is value destruction for your investment, she said.  

“That kind of behaviour repeats itself, especially in times of uncertainty and especially in times of market volatility, and you can see how that can be self-destructive for clients at the end.”

In uncertain times, clients should go back to what they know for certain, which is usually the reason they started investing or saving.

“Go back to the plan. What was your goal? What was the plan you put in place? What were the instruments that we identified at that point as appropriate?”

“If none of those have changed, don’t change anything.”

“Often, I think the biggest mistake we see clients make is through this indecision of uncertainty. Because we don’t know which way to go, we often do nothing.”

Van Heerden said that in the long term, this is the most debilitating consequence for investors because they miss out on the great power of compounding interest. 

It’s not timing the market or knowing when it’s the right time to invest or the wrong time to invest. “It’s just staying invested that counts at the end of the day and gives you the power of compounding interest and getting your money making money for you.”

“Patience, as it relates to investing, has a number of factors to think about,” McKeaveney said.

“One factor is the ability to allow your investments to compound themselves over very long periods of time. And another factor is related to not fiddling around too much and trying to time the market, thereby interrupting that compounding process.”

For example, calculations show that if you invest R100,000 for 20 years at a 10% return, it would increase to nearly R700,000.

“But if you invest it for another 20 years at the same return with that R700,000, you would have R4.5 million, which is another R3.8 million.”

Markets tend to have large and painful drawdowns on a fairly regular basis, but it is important to stay the course and not panic. 

He used the S&P 500 as an example. “The average fall during each of the last 44 calendar years was 14% each year, whilst returns were ultimately still positive in 33 of the 44 years.”

Paul McKeaveney

Risk mitigation

Risk mitigation remains important for investors, especially in uncertain times.

McKeaveney explained that, as a starting point, it is important for investors to identify what they are trying to protect their wealth from. 

“Diversification is probably the most important strategy to protect your wealth.” Investing money offshore can be a key strategy in this regard.

“But at the individual investor level, it can be difficult to identify exactly what you need to protect against and how best to do it, which can be intimidating.” 

Because of this, he advised that investments like structured products, which offer explicit capital protection, can be a good start.

History can also be a great informant when it comes to investment strategies, McKeaveney explained. 

“A lot of what drives the big issues today is steeped in historical events that can go back hundreds of years. It’s important that investors understand their history and how we got to where we are today.”

The Russia-Ukraine war and the pandemic are some recent examples of this phenomenon.

“Given that financial markets have been around for a very, very long time, one has the ability to do your homework and look at how markets reacted to similar events during history.”

Skilled investors can identify common threads and position accordingly, he said.


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