When the markets cause concern, consider context
What is your burning question? If you were seated, face-to-face with your financial planner right now, what would be that top-of-mind concern that you would raise?
I got a sense of the answer at the most recent Retiremeant™ workshop, our third in Johannesburg, when I asked the audience, comprising clients and their guests, “What would you most like me to share with in the time we have together?” The unanimous response was: the flat market conditions.
It is the same question that has been emerging in our client review meetings, where the reporting cycle preceding it has reflected flat returns.
I thought, in light of this understandable sense of disquiet, that I might share some points to lend perspective.
The relevant reporting period
The reporting period is the period over which you measure your returns. For most people, it is the day on which you invest your money until the end of the most recent month.
I found the following stats quite interesting:
* If we go back three years from December 2017, we see that the JSE yielded an 18.5% return
* Three years from 31 march 2018, and the JSE only gave you a 6% return (this is why the last quarterlies statements looked so poor)
* Go back three years from the 31 May 2018, and we have a return of 10%.
So as you can see there is quite a difference in returns across these three periods which are within six months of each other.
The same applies to the currency, US$ to the rand. Looking at the three periods in rands, you either gained 7%, lost 2% or gained 4.3%. This variance can be quite significant. This is why the recommended term for investing in equities is seven years plus: over the short to medium term, returns are highly volatile. We are gratified by the fact that we have had no negative years since 2008, the longest period in history without any negative years. If we look at the five-year and seven-year performance, we are comfortable. It’s through these inconsistent returns that we must sit tight.
A local and global trend
Blaming the asset manager might be a valid response, were the markets going up and your investments were not. In reality, it’s the investment markets as a whole that have really struggled this year, both locally and globally, so it’s not fair to blame the asset manager.
Our JSE is down 6% this year and most of the global indicies are in the same space. Both PMX and OM Multi managers are doing the best they can, ensuring you have a well-balanced portfolio spread across various asset classes, and also across a number of world-leading asset managers.
We will share updates with you in your review meeting: information relating to market performance; we aim to give you a greater understanding of the current investment climate. It’s useful to remind ourselves that last year was probably the toughest year for South Africa in the post apartheid era: sentiment was at an all-time low, yet our JSE still delivered a 21% return.
Change in Chartered’s reporting to clients
At Chartered, we have been working on creating a reporting communique that is comprehensive and easy-to-read. We are happy to announce that, from the beginning of July, you, our clients, will no longer receive the communique entitled Interest. Rather, you will receive Navigating the Tides which is your new weekly economic market update. If you have unsubscribed before, you will find we have re-subscribed you, giving you the option to consider this new format. If you don’t receive it, please check your junk mail or spam folder – your server may be filtering it out.
As always, Chartered Wealth Solutions is hard at work to continue improving on the service we offer our clients, and to keep our relationship based on trust and reliability. I appreciate discussions with our clients, be it face-to-face at events or via email, so feel free to continue to communicate with me.