Equities deliver real returns to patient investors. \u201cWhile nobody wants to get rich slowly, the irony is that it pays to stay the course,\u201d said Visagie.<\/p>\n
If an investor had been exposed to the South African equity market from 1 January 1995 to 30 April 2019, they would have generated an annual return of 14.2%, he pointed out.<\/p>\n
This period includes tough market conditions, including the emerging market crisis in 1998, the tech bubble of the early 2000s and the global financial crisis in 2008\/09 – and the last five years during which the local equity market has been relatively flat. After inflation is accounted for, this is an annualised real return of just over 8% per annum in 23 years.<\/p>\n
“The numbers are clear; don\u2019t worry about the noise, think long-term,\u201d Visagie said.<\/p>\n
In spite of the evidence, the temptation exists to attempt to time the market \u2013 that is, pick an entry and\/or exit points. \u201cWe believe that trying to time the market is a fruitless exercise,\u201d said Visagie.\u00a0 \u201cOften, the best time to invest is when things feel most uncomfortable.\u201d<\/p>\n
If you had tried to time the market over the past 23 years and missed just the best 100 days of the total 5,934 trading days, your return would have been -2.2% per annum, instead of 14.2% per annum for the full period, Morningstar said.<\/p>\n
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“It\u2019s clear, staying the course works,” Visagie said. Yet, despite the compelling evidence, there has been a material move by investors out of equities and into more conservative money market and fixed income products. These asset classes provide a comfortable return profile with more predictable returns, and they have rewarded investors with positive returns over the past few years, the portfolio lead said.<\/p>\n Has this been an appropriate course of action?<\/strong><\/p>\n Time will tell, Visagie said, but Morningstar hasn’t ruled out a comeback for the unit trust industry, “especially given that the largest casualty has been the multi asset\/balanced funds which used to take the lion\u2019s share of industry flows”.<\/p>\n \u201cDespite disappointing performance from local risk assets and balanced funds in the recent past, we believe that investors with a medium- to long-term horizon need exposure to these assets to generate inflation-beating returns,\u201d said Visagie. He said that investors run the risk of not achieving their financial goals if they move between different asset classes based on short-term performance.<\/p>\n![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2019\/06\/Morningstar.png\")
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