During 2022, market sentiment was negatively impacted by events such as the war in the Ukraine, Covid, higher inflation and interest rates. Global equities fell by 15% year to date ending May 2022.
SA asset classes were more resilient due to higher commodity prices.
Although growth assets such as equity and property underperformed during 2022, these asset classes are required to outperform money market funds over the long term as illustrated in the table below.
Asisa category returns for the period 01/07/2000 – 31/05/2022
Source: Morningstar (01/07/2000 – 31/05/2022)
Growth assets (such as equities) provides the highest expected return over the long-term, but with high levels of volatility over the short-term. The chance of losing capital in a one-year period is much greater than that of an investment in cash or bonds.
However, the longer you remain invested in equities, the lower this variability becomes and the lower your risk of losing capital becomes.
Therefore, it is important to stick to your investment strategy during the downturn in markets to avoid any losses, as this will create opportunities when the market recovers.
The odds of losing money reduce drastically if you give your investment time
Remain invested in equities
What to keep in mind:
- Look ahead, not behind you, when making investment decisions – wise investors knows that past performance is not an indicator of future performance.
- Maintaining exposure to growth assets over a long-time horizon can mitigate the negative effects of inflation and ensure a more successful investment journey
- When investing long-term, you need to learn to tune out the short-term noise, be patient and know that nothing lasts forever
- Investors looking to achieve long-term capital growth have one great advantage over time.
- Focus on the fundamentals and stick to your investment plan.
“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.” Warren Buffett
Diaan Janse van Rensburg, Investment Specialist at Efficient Wealth and Managing Director at Naviga Solutions
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If you have long-held equities with very substantial gains, selling triggers a capital gain even if you buy the same equities back a year from now for lower. the tax man doesn’t cater for a pause to park your cash. Unless you have a bunch of dogs to sell and realize those losses…
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