Site url:
Pagecontext: org.apache.jasper.runtime.PageContextImpl@4bafe10c
A newspaper article that explains what is likely to happen to investments during COVID-19 worldwide pandemic.

Don’t panic! Stay invested

It is only natural to be worried when you see markets fall sharply and the value of your investments decreases.

Unfortunately, it is also human nature to make the wrong decisions when it comes to your investments during times of crisis.

The COVID-19 pandemic has once again shown how quickly things can change in financial markets. Let’s take three friends, all aged 30 years, as an example of what to do, and a cautionary tale of what not to do when it comes to investing.

3 friends start their investment journey

Mary, Sipho, and Piet, after receiving financial advice, all decided to invest R100 000 each into an aggressive fund* on 1 January 2020. By 23 March, after a rocky time in the markets – the stock exchange had already crashed by more than 30% because of uncertainty around the pandemic and the worldwide lockdowns – Sipho decided ‘enough is enough’ and switched out of the fund into a conservative fund**, one where he feels his money would be safer.

Piet, worried about the markets and panicking, decided to withdraw all of his money from the fund and invest it in a money market unit trust. Mary, however, listens to her financial adviser and decides to stay focused on her long term goals. She keeps her money in the fund, knowing that if your personal circumstances don’t change, your investment strategy shouldn’t either.

In April the market begins to recover, as markets typically do. At the end of June, Mary is better off than Sipho and Piet. Mary’s investment is now worth R91 000. This is still less than the initial investment, but she knows her money is in the most suitable fund for her personal circumstances, and that over time her money will grow and she will achieve her financial goals.

Sipho, who switched to the conservative fund, is worse off than Mary and his money is now only worth R83 000. On top of that Sipho’s investment – if he doesn’t switch back to the aggressive fund – will likely not grow as much as Mary’s, and over the long term, he will be worse off.

Piet, who panicked and withdrew all his money and switched to a ‘safer’ money market unit trust, only has R75 000 at the end of June. Piet will also have to switch back into the original fund if he wants his money to grow over the long term, but he will buy back at a time when the markets have recovered and he has less money to work with, which will likely leave him in a worse position over the long term compared to his two friends Mary and Sipho.

Investing has more to do with waiting than doing

The lesson is – be like Mary, and not like Sipho or Piet.

Doing "something" gives us a feeling of control

The need to make changes to our investments may provide temporary emotional relief and a feeling that we are slightly more in control of the situation, but at a cost. In the longer term, the wrong decisions taken during market volatility and times of uncertainty can have a devastating effect on your investments and into retirement.

The last time the markets experienced a similar shock like the one earlier in 2020 was the global financial crisis of 2008/2009. Our research shows that, during that crisis, thousands of clients switched to ‘safer’ investments, ignoring that their investment goals had not changed, but only the environment around these goals.

Many chose to switch, and some gave in and disinvested, thereby destroying value. How? Once in safer investments, these clients needed so much reassurance to enter equity markets once more that they missed out on one of South Africa’s most sustained bull markets that followed.

Your financial adviser can also be an essential partner during these uncertain times. An adviser can help you not to take on unnecessary risks and prevent costly mistakes by avoiding emotional decisions. With your adviser, you can prepare a financial plan to address immediate challenges and get a strategy in place for you to achieve your long-term financial goals.

To try and time the market as an investor, as Sipho and Piet did, is a guaranteed way to lock in any losses and, consequently, also to miss out on any potential recovery in markets. So what should investors do? Like Mary, doing nothing is often the best strategy.

The key during uncertain and volatile times is to not touch your investments, but to keep it in a diversified basket of different asset classes and to look beyond short-term fears to your long-term goals. Remain invested, stick to your long-term investment strategy, and you will more likely achieve your financial goals.

* Based on The Momentum Focus 7 Fund of Funds (Asisa sector SA - Multi Asset - High Equity)

** Based on The Momentum Focus 3 Fund of Funds (Asisa sector SA - Multi Asset - Low Equity)

In case you missed it

Find all our latest and previous newsletters, all under one, easy-to-find space, for your convenience.

Retail Retirement Funds Trustee Newsletter 2022

Retail Retirement Funds Trustee Newsletter 2021

Retail Retirement Funds Trustee Newsletter 2019

Retail Retirement Funds Trustee Newsletter 2018

We and our selected partners use cookies to enhance and personalise your experience on our website.Please see our cookie policy for more information.

To enhance your user experience on our site, learn more about our supported browsers

Your browser's cookies are disabled. Enable cookies to ensure our website functions correctly. View our Privacy Notice.

Tell us more!

We're always looking for ways to improve your online experience. Please take a moment to complete the
2-minute questionnaire.