Looking back to where we stood this time last year, cash had outperformed all other major asset classes in 2018. The annualised 3-year return of the JSE All Share Total Return Index at the end of 2018 was in line with that of cash over the same period. This disappointing return alongside headlines of load shedding, rising debt levels, ratings downgrade, trade wars and Brexit lead many investors to question if they should in fact switch into cash.
Had an investor switched to cash in January 2019 after a volatile period of low returns over the previous three years, their return in 2019 would have been worse than had they left it invested in an average balanced fund, as shown in the table below which compares the return on cash vs the average balanced fund.
*The Short-Term Fixed Interest Composite index (STeFI) is used to represent a cash return.
**The South African Multi-Asset High Equity Index is used to represent the average balanced fund return.
Source: Profile Data
The benefit of staying invested in growth assets is evident over the long-term. Investors who have remained invested in growth assets in 2019 have outperformed cash.
Staying invested throughout the cycle is an important objective for any investor. A holistic financial planner can assist investors in achieving their long-term goals.
Markets fluctuate. Stay the course.
“Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.”
– Charlie Munger