As we release our Annual Investment Review for 2019 we have the opportunity to reflect on another turbulent year for the country and the globe.
There will be plenty more noise this month around the State of the Nation Address and the Budget Speech. Expect saturation coverage and in-depth analysis, and commentary from all and sundry, but don’t expect anyone to remember any of it the following week. Don’t worry, though, because none of it is likely to affect your investments in any material way.
All year long, we are alarmed by breaking news, by opinions and forecasts, by economic data points, and by big market moves. Some of it may impact in the short-term, but most of it is just noise.
The year 2019 is (yet another) case in point. As our Chief Executive Steven Nathan notes in this video discussing highlights of the 10X Investments Annual Investment Review, there was plenty going on in SA last year – two-quarters of economic contraction, a big fall-off in confidence, regular bouts of load-shedding, tales of financial woe out of Eskom, SAA and other SOEs, and increasingly scary forecasts about the state of our country’s finances.
The inevitable ratings downgrade from Moody’s loomed large at every turn. Internationally, investors worried about the inverted yield curve, about trade wars and a no-deal Brexit.
And still, investors were handsomely rewarded for taking on stock market risk, both locally and internationally. Those who reacted to the gloomy news cycle and sought the comfort of cash missed out. That won’t always happen, of course. Sometimes bad news is bad news for the market. But if investors remain mindful of their long-term goal and time horizon, even that shouldn’t matter.
Thankfully, the things that matter most to your long-term portfolio are things you can control: the amount you save, the type of portfolio you invest in (high, medium or low equity) and the fees you pay.
For long-term investors, the goal must be to maximise average return, not this year’s return. That is best achieved by following a sensible investment plan and having faith that, while it may not prove optimal every year, it should prove optimal across all the years.