While 2021 was a year of financial recovery – just how good was it?
According to Yuvern Dokie, senior technical investment specialist at Alexander Forbes Investments, 2021 will be remembered as the year after the Covid-19-induced market crash and the peak of the pandemic in South Africa.
While Alexander Forbes believes the worst may be over, given a sustained market recovery, elements of uncertainty and unpredictability remain as a result of different Covid-19 variants and their impact on the economy.
Despite this, the pandemic has entrenched the knowledge that well-diversified portfolio solutions continue to play a critical role in achieving financial goals and investment success over long periods, the financial services firm said.
How R100 invested on 1 January 2021 would have grown in different investments
Considering the fall that property – as an asset class, locally and globally – experienced over the past couple of years, the bounceback in 2021 was welcomed, said Dokie. Being invested in property would have rewarded investors handsomely, as it was among the best-performing asset classes in 2021.
Both local and global equities welcomed strong investment returns of close to 30% for the year. In the SA equity market, as measured by the FTSE/JSE All Share Index (ALSI), nearly half (67 out of 138) of the companies underperformed the total index in 2021.
Close to 70% (27 out of 40) of the companies in the FTSE/JSE Top 40 (ALSI Top 40) underperformed the ALSI. The ALSI Top 40 is close to 90% of the ALSI by market cap. This has shown how widely investment returns are spread within the ALSI and how the top performers have driven the strong outcome over the year.
Even bond markets recovered somewhat, but remained relatively flat due to uncertain global inflation and interest rates, said Dokie. The ‘safe haven’, cash, offered a positive return for the year, but unfortunately could not keep up with the pace of inflation and therefore yielded negative real returns.
How the ALSI Top 40 performed against the ALSI during 2021 (1 January 2021 to 31 December 2021
The huge difference (over 200%) between the best and worst performers of the ALSI Top 40 shows the wide spectrum of returns available on the Johannesburg Stock Exchange, Alexander Forbes Investments pointed out.
Times may have changed but sound investment principles haven’t said Dokie. Receiving personalised financial advice will help to ensure that your investments are purposefully spread across asset classes.