Staying the Course

A3 blFitch rating agency on Friday revised the outlook on South Africa to negative from stable. 

Electricity system on the brink of collapse – Eskom. 

GDP fell 0.6% in the first quarter of 2014. 

24.7% contraction in mining and quarrying – the biggest contraction in almost 50 years – as the strikes at the platinum mines continue. 

The South African business confidence index remains a worry as it posted a decade low at 88.9. 

Wall Street ends lower after World Bank cuts growth forecast.

And so on… The negative news headlines don’t let up!

As a South African investor, you may be a little nervous about your investment portfolio and think that some drastic action is needed.

As an FPM investment client, should you be making changes to your portfolio as a result of all of the negative news, particularly when you consider that the local equity market is widely believed to be overvalued and due for a correction?

Our response… An emphatic NO! Here’s why:

Active management

FPM’s suite of investment solutions has been structured in partnership with a skilled and experienced investment consultant, Analytics Consulting (Pty) Ltd. The solutions are managed according to a meticulous and consistent investment philosophy and process with ongoing reviews being conducted by the Investment Committee.

With exposure to the correct solution, as determined by FPM as your financial advisor, changes to the allocation to specific asset classes is managed daily by the top asset management companies as the market and economic environment changes.

Your portfolio is therefore not static and is continually being adjusted within your specific investment mandate.

Timing the Market

Timing the market is a sure way to destroy investor value. The intent is to sell out of the market when prices are high and then re-enter the market when prices have bottomed.

Getting the timing of the exit and re-entry instruction right is, in our opinion, impossible because the markets move from being overvalued to undervalued, and vice versa, within unpredictable cycles.

Long-term Investment Plan

FPM’s role as financial advisor is to obtain detailed information about your present financial situation and future financial goals and objectives, analyse this information in a logical and easy-to-understand manner, develop a strategy that will enable you to meet your objectives and then to implement and monitor that strategy in the future.

We believe that this strategy needs to be implemented in partnership with the right asset managers – managers with long-term track records of outperformance due to the implementation of consistent investment philosophies.

We also believe that sticking to a long-term investment plan, irrespective of short-term volatility, is the best strategy to follow.

SeanSean Fahy
Investment Advisor
0861 111 376

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.