So, lockdown and Corona time is one of the few times when it is not great to be positive. However, in these strange times, a positive frame of mind is often the difference between “normality” and insanity.
The strange and wonderful ideas of our government still don’t make sense. I can go for a swim in the sea as long as I have a boogie board tied to my leg but I need to move quickly when I’m back on the beach because that is obviously where the corona virus lurks, once I get back onto the promenade with ten thousand other people, I am “safe”??!
The slide below is an interesting one. It shows the average South African Multi-Asset High Equity Fund (Balanced and Reg28 compliant), the average Global Multi-Asset High Equity fund and the S&P500 all in Rands from 2001. Please remember that 2001 was the last time we had the Rand at 3 standard deviations undervalued.
The good news for those that bonded everything and took all their money offshore, is that in April 2020, they finally caught up to local balanced funds, the bad news is that if you didn’t put everything in the S&P500, but chose a globally diversified portfolio, you still have some way to go.
Given all the noise around regulation 28, prescribed assets and the odd mention of Pension Fund expropriation. It is important to realise that things can change, back in 2001 investing everything offshore was a no brainer if you were going to make a fortune. If you are going to be retiring in South Africa it is a very risky strategy to take all of your money offshore. If your future liabilities (living costs) are going to be in Rands, you need to be able to cover this liability in Rands.
Diversification is the only free lunch that we have, if you called the S&P500 correctly 10 years ago well done, there is however more and more talk about FAANGM plus a few others being the next bubble. The chart below from BCA shows an interesting ten-year bubble phenomenon across the world.
Whilst we don’t know what the future will hold, I am certain that events good and bad are going to occur which we did not foresee and have effects on our portfolios that we could not even imagine. Stay calm, stay invested, stay diversified and stay positively negative.
CFP® CA (SA)