Long-term strategy required to navigate the junk status storm
The recent fallout from South Africa’s credit downgrade to junk status by two rating agencies has left many people asking themselves what the future holds.
Anet Ahern from PSG Asset Management spoke at the East Rand Business Women May meeting at Summer Place about how the country’s junk status will affect South Africans.
Ahern said the country’s economic outlook may be poor, but it depends on each individual’s perspective on how they view the junk status.
“Investor sentiment in the market is at the lowest it has been for some time. There is a lot of noise, a lot of fear and a lot of volatility.
“In such times, investors are tempted to make bad investment decisions. There are also inherent dangers in trying to make macroeconomic forecasts.
“There is a need to focus on the client’s investment objective.
It’s a challenging environment to make investment decisions and therefore you need a long-term strategy and a framework for making decisions
According to the Ahern, uncertainty and asset valuations are the two factors that will impact future returns.
“Uncertainty seems to be the biggest concern of every investor at the moment; however, investors should be concerned with current asset valuations where they see opportunity in the market,” Ahern said.
She advised people to avoid putting all their money offshore as the rand is still undervalued. She said diversification is always essential.
Ahern also shared tips on how to manage money in volatile times.
It is important not to forecast, think long-term, have patience, grab the opportunities that arise in times of panic and buy with a margin of safety.
“When we talk about the margin of safety we mean the difference between what the investment is worth and the price you pay. Investors often struggle with buying when the macro environment is poor.
“At PSG Asset Management we often end up buying early and have to wait some time for the investment view to pay off. Long-term investment success means you have to see opportunities when others are fearful. Do your homework on what you are investing in, and then be patient,” she said.
