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Every day on the JSE in the last 10 years in one chart

The market has been predictably unpredictable.

Investors are often told that the stock market is volatile. This is one of its defining characteristics. It is however important to understand exactly what this means.

The volatility of the stock market comes out in two distinct ways. The first is that, in the short term, the market is almost entirely unpredictable. A recent analysis by Corion Capital shows that the chances of seeing a positive return from the JSE on any single day are only slightly better than a coin toss.

Over the past 10 years, the JSE has made daily gains 53% of the time. As the graphic below illustrates, the dispersion of negative and positive days is almost equal.

This is not just characteristic of the past decade. The most recent Long Term Perspectives analysis published by Old Mutual’s MacroSolutions boutique shows that over the 20 years to the end of 2018, the JSE delivered a negative daily return 45% of the time.

Extending the measurement period to a week doesn’t change this significantly. According to Long Term Perspectives, the JSE was lower 43% of the time on a weekly basis, which is still only slightly less than random.

Even over a month, the JSE was down 38% of the time. Over the past 12 months, this has been 50%.

JSE monthly movements
Oct Nov Dec Jan Feb March April May June July Aug Sept
Down Down Up Up Up Up Up Down Up Down Down Down

Source: Bloomberg

For six of these months the JSE was higher, and for six months it was lower. What makes this even more noteworthy is that over the full period, the market was effectively flat. It has vacillated significantly, but ended up at the same level.

What this shows is that the market is constantly in flux over the short term. No investor can have significant confidence in where the market might go tomorrow, next week or next month all of the time. Even the best technical analysts, who meticulously study market trends, are very often wrong.

This is why it is so important to see the stock market as a long term vehicle for building wealth. Day to day, week to week and even month to month it is unpredictable, but over many years, it is far less so.

Long Term Perspectives shows that since 1960, there has not been a single five- or 10-year period over which the JSE has delivered a negative return. Despite being up for only 52% of the days in the past 10 years, the JSE has still gained 11.5% per annum over this period.

Big swings

The second manifestation of volatility is that the market can experience very large, very rapid changes. Corion Capital’s analysis shows that since 2008, the largest one-day gain on the market has been 4.4%, and the worst loss was -3.6%.

These are substantial deviations. What Corion Capital also found, however, was that these are highly infrequent.

In fact, 95% of the time, the JSE didn’t gain or lose more than 2% on any single day. For 75% of the time, the daily movements were lower than 1%.

Most of the time, therefore, the market is doing very little. Of course, 30 consecutive days of 1% gains or 1% losses would be highly meaningful, but this has never happened. As pointed out earlier, the market’s volatility inevitably means that there will be days of losses even in a strong upward market, and days of gains even when the market is strongly trending downwards.

Following the daily market movements is therefore meaningless. Not only are the significant majority of day-to-day changes too small to be consequential, they are also not indicative of what will happen next.

Read: It makes no difference whether the JSE went up or down today

The important lesson for investors to appreciate when it comes to volatility is that the stock market often gives the impression that a lot is happening, when little actually is. Most of the time, movements in share prices only really become meaningful over long periods of time.

In that respect, equities are predictably unpredictable in the short term. Any investor looking at their portfolio every day should expect to be disappointed almost as often as they are pleased. Over the long term, however, the latter emotion is far more likely to win out.

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From a retirement point of view. Long term is likely to be 20 years . For a lot maybe 10. All so called “advisors “ got this wrong and still the fees drain what is left.

Chalky i am not too sure what this statement means. Are you saying that ‘advisors” are the reasons why performance is bad and that they drained the performance because of their fees? If so, then perhaps you are poorly informed as ‘advisors” fees are regulated and have always been. No ‘advisor’ can drain or take more fees than is legally allowed. Perhaps you should really do some home work!

Please read what advisors offer “our aim is inflation plus 2 “ and so it goes on year after for the past 5 years. No growth or minus 4% but fees remain constant . You are perfectly correct about legality …If my investment was a business then as a “shareholder “ I would ask why is the bottom line so poor ? Then the CEO should respond and reduce the expenses. Not the case

Chalky perhaps you really need to change your ‘advisor” if he is promising inflation plus 2″! I am sure he is working off a industry standard or a fund manager fund objective or benchmark fact sheet. These “prospectus” states what the objectives of the fund is and what they would like to achieve. The ‘advisor” will be paid a management fee agreed by you the investor( and you should have agreed what you are prepared to pay them to manage your investment) however,the real fees are earned by the asset managers who take anything up to 2.5% pa and profits. Your statement should rather be why do asset manager get paid anything when they miss there benchmarks and why do they not have to answer questions when they clearly get it wrong. Remember so called ‘advisors’ put a recommendation together with facts given to them by these asset managers who should know what they want to achieve. When they bomb out then suddenly they blame ‘advisors’ who had your money in the wrong portfolio. Ask them this question and do not jump onto the band wagon and blame one party only!

They don’t take more than allowed! How generous of them!

Even public school level logic would suggest that this does not mean that they are effective or value for money. Glad you are not managing mine. Real estate agents and commission based FAs. Same laerskool.

In terms of the economy being dead, we have Jacob Zuma and is corrupt band of spawn and nincompoops to thank for stealing from every South African and destroying all state businesses over the past decade plus.

In terms of selection poor selection of investments, and loss of value, we have the fund managers and their salespeople aka “advisors” to thank for that. No matter the outcome, their fees will be milked from your hard-earned money so that they can buy their expensive cars and holiday houses.

Are you suggesting no fees or that fees should be lower?

The difference is that SA is not a normal case (since 1994) for investing and the degree of value destruction (especially of the last 8 years) is showing this. The regulations remove the ability to move more to cash unfortunately.

So are you implying that SA was a “normal case” pre-94, when we had prescribed assets, international sanctions, dual rand structure, severe limitations on investing abroad?

@Godfreya….oh 100% yes !

Removing the emotional factor here, the health of any economy is very easy to determine.

Based on some simple critical factors like inflation, infrastructure, cost of goods, small efficient business friendly government, honest and low tax regime, industry and manufacturing [ GDP], minimal red tape, labour friendly market based on merit not equality, safety and security etc are a few things that spring to mind

Sorry to burst your bubble, but the ANC has FAILED dismally in every single factor here


I’m implying that SA has never been a normal case and there has never been a prolonged period of enablement to allow for normal economic growth. Never.

@Godfreya. Towards the end of Apartheid, there were many solutions to SA’s economic problems, provided democracy for all was allowed.

Fast-forward 25 yrs, the current ANC-govt does not have those aces in SA’s deck of cards:
(i) We cannot request the international community to forego sanctions against SA, as there are none presently.
(ii) SA cannot abandon a damaging ‘dual rand’ structure, so we don’t have any dead weight to cast over the sides of ship-SA.
(iii) SA currently has generous capital controls already…leaving little scope left to free up more excon.
(iv) We cannot cease the cost of an Angolan/Bush War, as there is no external conflict draining the state.

The ANC is the driver of it’s own car, allowing too many non-paying passengers for the vehicle’s weight, while slashing it’s own tyres (own-goals i.r.o. socialist, populist policies, state interference into private sector, etc.) and I fear SA’s spare tyre has been pawned off already.

The difference now is that SA is merely on its long-term path towards structural economic decline (as evident where SA shifted down on various global rankings of all sorts), to become an African country on par with rest of continent, as the pale-skinned colonialists continue to leave with their skills & wealth.
Ever wondered why we increasingly struggle to “get things to work properly” in SA?

On a positive note, SA won’t sink beneath the waves to disappear…we will merely become LESS RELEVANT against global peers (like Rhodesia is proving to us all….apologies, the name ‘Zim’ is too INSIGNIFICANT to mention anymore….it resembles very little economy wise.)

Take a long term view-in 15 years(no typo) the return on the JSE in USD has been close to ZERO!!So had you taken USD notes and put them in a safe you would have the same return-despite political, market and currency risk-NO compensation for all these risks!

Now with SOEs failing, debt to GDP screaming up, 30% unemployment, zero growth, the ANC stealing the country broke and the judiciary captured -why would this change?

Now the judiciary is captured. Sorry, can’t take you seriously anymore.

Judge Hlope-still practicing after trying to influence the Constitutional Court

Judge Motata-stupidly drunk…in 2007….

Judge Sereti-found wanting in capability

These are the few..who have been caught!

Drunk and suspended and incompetent is not captured.

This is why you lot are a bit of a joke.

@Anything….you do realise you and ‘Sam the Taxman’ are in effect on the same page here ???

Quit being so confrontational by splitting hairs, and read his comment in context please

The only joke is your constant emotionally based attacks becoming a thread here

15 year return on JSE inc dividends is 13.87% Annualised depreciation of the rand vs the $ over the same period is 5.77% so that’s not what I would call close to Zero as you put it. I’m glad you don’t do my tax…

Investing in a trust fund is like investing yourself as an employee, if the business makes money you get paid, if it loses money you get a pavement seat with a tin can. Opening a savings account with a reputable bank will enable you to build up a capital which will enabling you to explore additional ventures. Now, what’s more challenging than let’s say taking 50% of your savings to the stock exchange. Here you will learn the ups and downs of economical cycles, risk aversions, human sentiment, government greed, and much more, all of which will make you get up in the morning ( irrespective of your age) look the world in the eye and say to yourself lets go for it!!!

I’m not sure what you’ve based your “last 10 years” of the JSE growth on, at 11.5% you’re way off. If I take the JSE ALSI Oct 09 2009 at 2655 and todays value at 3933 9at the time of writing this) I get an annual growth rate of 4.8% pa. That is bellow CPI and money market rates. Cash is a better investment than stocks, unless you have the knowledge to cherry pick, which still isn’t guaranteed to produce results. This is the fundamental issue with our economy, its more profitable to hold onto cash than to invest it into the businesses that make up our economy.

The 11.5% annual return includes dividends reinvested, which would not reflect in the index level.

This is why no knowledge is dangerous, but a little is even worse. Dividends.

Last ten years is not a good period for evaluation of past performance, because ten years ago the country (and the World) was coming out of the recession of 2008. This distorts the longer-term patterns and trend.

It would be better to look at 12 years or longer. Or, if you risk it, nine years or less.

In mid-2014 I studied the previous five years of the market and thought I would gain about 18% annually, so I retired on my investments. To my surprise (and to that of everyone else, including every FA), the last five years from then to now have been pretty poor.

Sometimes we learn, sometimes not.

Here we go again with journalist promoting long term investing. This article proves my point exactly why the JSE is short term trading heaven because of the volatility. Being an Intraday trader I benefit from the Alsi 40’s ups and downs everyday. Thank you, JSE for helping me make a living and please continue with the volatility.

Dear Navigator,

If you thought the JSE would give you 18% per annum to fund your retirement 10 years ago, you weren’t paying attention…or playing too much golf or bowls or whatever.
all the signs were screaming that the JSE is not the place to be.
Several columnists on MW tried to warn about the financial tsunami heading the way of the JSE, which you and millions of investors seemingly ignored. Now is too late which means that shopping on Tuesdays for Pensioner Specials becomes a nasty reality.

Easy with hindsight. I have long thought the JSE would be under threat and have been screwed by generations of advisers and stockbrokers so what did I do? I invested in property, a nice farm no less. That was going quite well until the cretinous Cyril embraced EWC in order to get his job. Like the JSE, its value dropped sharply.

My sad point; I reckon SA has tipped, per capita GDP down, borrowing, population, crime and unemployment up and just about every economic indicator is negative. NHI is coming. Very little positive is being done.

So looking at any but maybe the last two years of the local (not Naspers etc) JSE to predict the future and suggest “long term investing” is, IMHO, foolish to very foolish. Sensible advice may have been, and still be, buy only rand hedges and get out of SA, Magnus Heystek style.

This decade has been especially bad on the JSE and even more so when compare R1m invested in say simply an S&P500 etf.

October 2009 the runt was 7.4 so you invested $135k and the S&P was around 1067 so you bought 126.5 units call it. The S&P now is 2910 so your 126.5 is now $368k not counting reinvestment of dividends. The 368 is now roughly R5.5m. About 18% or 19% annual return….

I would rather not work out what R1m in the ALSI over tennyears would be worth now but I would venture less than R1.5m.

BUT – I am not advocating buying into US equities now. 125 months is a very very long bull run!!!!

Including dividends the ALSI has returned 189% over 10 years or 11.22% annualised. So it has not been great but not especially bad as you indicate. The last 5 years have been bad at 5.6% annualised. You are correct that the S&P 500 has been strong at 18.8% annualised. The JSE looks more fairly valued than the S&P at the moment though so extrapolating these returns over the next 5 years would probably not be a clever thing to do.

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