This year many South African investors took refuge in the perceived safety of cash investments, but in the current economic and investment environment, South African equities (listed shares on the JSE) are an attractive choice for the long term.
This is the view of Pieter Koekemoer, the head of personal investments at Coronation Fund Managers. “Many investors de-risked their investment portfolios given the economic crisis we have experienced. However, the low interest rate environment means that cash has recently been delivering returns that are trailing inflation and are likely to do so for some time to come. Local equities, on the other hand, are currently attractively priced and offer a better chance of beating inflation, to grow your wealth over time,” he says.
Over the past three years, foreign investors have been consistent sellers of South African equities. Local investors also lost their appetite for domestic equities during a period of considerable economic and political challenges. As a result of this large-scale selling, equity returns have disappointed over the last five years, uncharacteristically underperforming bonds and cash. "As a result of so many investors giving up on the local market, many shares have become cheap, resulting in “compelling value available in the local stock market," Koekemoer says.
Coronation launched an SA equity-only fund 20 years ago, the “Top 20 Fund”, giving investors access to Coronation's best investment ideas on the JSE. As the fund limits exposure to 20 shares, it does mean that it’s higher risk, so there may be short periods of underperformance. But if investors are comfortable with riding those out, they can benefit from the longer-term investment potential.
The fund turned 20 this year and has doubled the returns of its benchmark index over those two decades. R100 000 invested at launch in 2000 would have grown to more than R2 million as at the end of September 2020 after all fees.
“While we think that selected local shares are attractive at the moment and some equity exposure is appropriate for most investors, remember that it is sensible in almost all cases to appropriately diversify your portfolio between asset classes and geographies. You can do this by investing online in a multi-asset fund with a minimum recommended investment period consistent with your time horizon, or by speaking to a qualified investment adviser about the right investment strategy for you,” Koekemoer says.
PERSONAL FINANCE