As if the political turmoil in our own country has not been enough to deal with this year we have also had to deal with two major political shocks overseas – Brexit in Great Britain and a Trump victory in the USA – what a 2016! Combine the fallout from these events with a generally sluggish world economy and one has a recipe for very average to poor investment returns over the past year. Whilst we don’t have a crystal ball as to what future returns will be we are of the opinion as mentioned in our last newsletter (August 2016) that investors will have to lower their return expectations going forward.
At volatile times like these it is important to have a well diversified portfolio. This is clearly illustrated in the chart below – no one asset class either locally or offshore has achieved consistent top quartile returns over the past 10 years.
Asset Class Returns in ZAR
The returns in this chart are all measured in SA Rand and it is interesting to note that due to the relative strength of the Rand over the past year (hard to believe but true) offshore investments have been a poor performer this year when measured in Rand terms. However in the previous 3 years they had performed well.
What this chart also clearly illustrates is that returns over a 10 year period generally don’t come in a straight line. Bad years when people tend to panic and sell are often followed by good years – then after a good year when people tend to buy the return is often a poor one. SA Equities in 2008 returned -23.2% followed by 32.1% in 2009 and 19% in 2010. Global Equities returned 32.8% in 2015 and this year to date have returned -9.9%.
In summary then our investment advice going into this uncertain period ahead is to remain invested in a well diversified portfolio giving yourself a chance over the long term to achieve inflation beating returns – something an investment in cash will not achieve.
(With thanks to Fundhouse for use of their chart.)
