Weekly Thoughts 25 September 2015

I spent time on an interactive graph of the South African stock market values this morning. The downs and ups over the past couple of months reminded me of the actions that some investors take to try and control the effects of this.

If someone (an investor / a client) tries to play the game of self-prediction and control where they themselves decide when to disinvest because they think the markets are too high, the problem is that in nearly every case this individual will re-enter the markets after the first significant upswing and lose the first 40 or 50% of the recovery. Or even all of it. Or even enter again above the point where they exited, because the movement can be that fast. This has been seen numerous times.

Over time – 10, 15, 20 years – remaining invested through volatile times proves in the end, to hardly have been affected by the down times. They can even end up being totally insignificant. This is because you continue to hold the same number of widgets – shares / units of a fund – which therefore will simply follow values back up again. By this I mean that if what you owned was worth R100 and it went down to R60 and then back up to R100, you’ve lost nothing. The downs are merely losses on paper. And if you’re investing monthly, its even better to have these declines because in that month you buy cheaper widgets.

Thinking about value, VW shares could be the value of the day right now!!