“The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.” Warren Buffett
A human being must be one of the most well-equipped species to create an unique identity from all others of its kind. Our intelligence and independent thinking should make us the most self-regulating species alive. In many ways we are, except when threatened and frightened. Time after time, when panic sets in and investors fall under pressure, their focus blurs and they join the safety of the collective. As you know, there is nothing more dangerous in investing than panicking and following the herd. Throughout the past few months, South Africa has seen extreme political turbulence. This has rippled through every aspect of our society, from financial markets to community outcries, and an angry and rather ominous feeling has settled over the country. Negative sentiment is everywhere and day-to day-conversations with clients clearly indicate how deeply people are affected by the events occurring in our beautiful country.
KEEP CALM AND FOCUS ON THE LONG TERM
So how do we help our clients to endure and survive this? It would be easy to join the masses, retreat into safety, sell out of our portfolios, buy gold like there is no tomorrow and start investigating the requirements for an Australian visa. However, it is exactly at this point that we need to remind our clients to act as true South Africans; they need to focus, remain calm and remind themselves that we have faced tough times before and we will face them again. South Africa may be a turbulent environment, but we are a strong nation of incredibly resilient people. To simply stay put and keep calm is not always that easy but history has proven that time heals and the same applies to our markets. The graph below shows how the JSE has moved sideways over the past two years of extreme volatility, but despite this, the positive growth is clearly evident over the longer term.
SECRET TO INVESTING SUCCESS
The key to successful investing over time is a combination of a long term strategy, solid investment philosophy, careful due-diligence and a trusted partnership between you and your financial planning advisor. It is not the investors who switched to cash “in time”, “saw the offshore opportunity” or “called the rand move” that succeed over time, but rather those clients with long-term defined strategies, solid investment philosophies and well-structured holistic plans designed to their unique time horizons and strategic asset allocations. The key to success of this combination, however, is the relationship and trust between you and your financial planning advisor. You need to understand that markets will always have ups and downs. The important part is for you to stick to your long-term financial plan and ignore market noise and, ultimately, reach your financial goals.