Investment bargains – When the market panics

Uncertainty creates volatile situations, and volatile situations create opportunities if you look in the right place.

By  Christiaan Wessels – Futurum Financial Group (Pty) Ltd.

It is human nature to panic when there is uncertainty in the world. It is normal to be unsure what is next when there is a war lurking in Europe. At least we got that off the table and we are sure about that. It seems in any case as if Russian President Vladimir Putin is not making the headway he had hoped, and that the president of Ukraine is implementing a different strategy which is boding very well for them. Just look at the fact where he asked Elon Musk to switch on his satellites to give them much needed communication channels and the internet.

It is still fresh in the memory about what happened to markets in March/April 2020 when Covid-19 announced itself to the world. Our very own JSE All Share Index lost about 40%-35% but recovered in six months’ time and went higher. Imagine selling out of your portfolio when the markets were down early in 2020. The fact is that you have not realised a loss until you switch out of the investment or withdraw from your investment. Markets went into a tailspin and there was a lot of volatility in world markets. Sounds familiar right…?

Uncertainty creates volatile situations, and volatile situations create opportunities if you look in the right place. Markets have been looking for an excuse to sell off a bit and the invasion of Russia into Ukraine was the perfect platform for that. Our own market has recovered the last couple of days, but that is mainly due to a drive in the resources and commodity sectors.

What am I trying to say?
If you have cash on hand, be ready to pull the trigger to invest it. There will certainly be buying opportunities worldwide. Especially in international markets. I’ll recommend getting exposure to fiat currency like US dollars. Any emerging market currency like the ZAR will probably only weaken further in a risk-on environment. Have the right strategy to convert your rands should you wish to take an offshore investment approach. You can get exposure via an asset swap as well where you don’t have to buy hard currencies first, but the fund selection for direct offshore investments is much more.

What about my current investment strategy?
There is no one answer for this, but the crux of the matter is you should be well-diversified as always. If you are in an investment where you have time on your side, it’s better to do nothing. However, you can look at moving funds out of money markets and interest-bearing accounts to value funds.
Do not, and I repeat, do not shift funds out of your investment portfolio that has taken a hit to more conservative funds. David Shapiro said it very well the other day on Moneyweb. He’s been on the JSE Stock Exchange for 50 years and one thing he knows is that markets always recover after a downfall. Maybe not the way we expect it to or how we are used to, but it recovers.

If you are risk-averse, that is fine. You can take part of your pension and buy a guaranteed life annuity. I like the idea of splitting retirement capital between life and living annuities if it suits the right investor. Also, note that it is only a matter of time before you can get 45% plus exposure in your pension money.

Tech stocks, especially in the US, have taken a hard hit and will probably take a few more hits, but if I take a 10-year plus outlook, I will still give exposure to those type of funds. There are so many funds you can choose from. You are welcome to contact me if you want to know more about the information given in this article.