SA unrest impulsive investment decisions

23 July 2021

Financial advisory business GTC cautions against making impulsive investment decisions in wake of South African unrest

Alongside the vast majority of South Africans, financial advisory business GTC is stunned and deeply saddened by the scenes of unrest witnessed over the past few days. It is an understandably emotional period, though director, and head of Asset Management at GTC, Manty Seligman says this is precisely when a balanced approach to financial management should be prioritised.

Seligman encourages all South African investors not to make financial decisions that are based on short-term, emotive issues. In particular, disinvestment from balanced funds structured precisely to mitigate risk and weather economic impacts is seldom in the best interest of those looking to ensure their long-term financial health.

“Professionally constructed portfolios are built strategically to include a wide and diverse range of asset classes, so that the balanced funds are exactly that: balanced, in terms of their approach to risk and long-term yield,” continues Seligman. “Balanced funds, by their nature, are designed to be robust and to mitigate the acute impact of extremely unusual shocks such as we’ve seen this week. It has been empirically proven that trying to time one’s entry to or exit from a market invariably results in lower returns. We believe that disinvesting from a balanced risk structure to an alternative product or portfolio such as a money market fund, which currently has a very low yield, is unlikely to be in an investor’s best long-term interest.”

The long-term implications of this week’s unrest on investor confidence and South Africa’s economic performance are by no means clear, and it is precisely when the future is uncertain that a balanced approach to risk is most advantageous. Investment decisions should be taken based on sound reasoning and verifiable knowledge, informed by guidance and advice from a financial advisor. The knowledge that if you’d missed the top 10 trading days over the past 20 years, you’d have missed out on some 40% return, should serve as a strong caution to investors to attempt to time markets based on sentiment and emotion.

Seligman concluded, “If you consider the last year, which has been marked by an exceptional set of economic impacts, the drawdown on our funds has been dramatically lower than market averages, and our returns have been admirable. The prevailing unrest does not in any way change our message to clients, which is that as long as portfolio allocations remain well structured, as measured on a disparate, logical basis, investors’ objectives remain achievable over the long term despite the current disturbing environment.”