Stocks: Don’t listen to the ‘prophets of doom’

2014-02-12 10:27

When Mark Twain wrote: “October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February”, he probably had South Africans in mind.

Young South Africans tend not to invest in stock markets because they fear their volatile nature and those who invest make the mistake of listening to stock market commentators who are too quick to spread fear during market fluctuations, says Peter Dempsey, deputy CEO of the Association for Savings and Investment SA.

Dempsey says people who invest in stock markets are usually driven by greed and fear, which makes them buy stocks during market booms and quickly sell during downturns. “Don’t follow the boom and bust, but have some goals and put a plan together.”

Thirty-year-old entrepreneur Lebogang Moeletsi shares the same sentiments. He started investing in the stock market in 2006 and says the worst thing to do would be to sell off your stocks during a crisis.

“This is when you buy more shares. You need to have a good plan in mind and think long term. I knew before I started investing that market fluctuations happened, so I factored in that risk,” says Moeletsi.

He says he started investing in equities because he wanted to create capital and start contributing towards his pension.

“What people aren’t aware of is that our retirement money is invested in the stock market anyway. This is a certain way to get a high return,” says Moeletsi.

He says there was a lack of education regarding the benefits you can gain from investing in stocks and that most people make the mistake of focusing solely on property.

Dempsey says investors who braved the 2008 financial crisis triggered by the global credit crunch as well as the extreme volatility of 2011 sparked by the eurozone crisis and held on to their investments would have ended 2013 with a significant profit.

“If you invested a R100 000 six years ago at the beginning of 2008 in the South African General Equity collective investment scheme category, it would be worth R174 445 at the end of December 2013,” he says.

Moeletsi says he has made a high return and he hasn’t sold his shares, even though the JSE All-Share index has lost a lot of value in recent months. He says keeping his money in the bank or in money markets was never an option because you paid for bank charges and your money loses value because of inflation.

The bad sentiment against investing in the stock market is promoted by market commentators, which Dempsey referred to as “prophets of doom”. He says investors who have been waiting on the sidelines for the right moment to sell their stocks may feel despondent as a result and sell before the time is right.

“If you have time on your side, you will be able to sit out the volatile times and watch your investments grow when the stock markets are running strong,” says Dempsey.

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