By Juggie Govender of East Coast Financial Services (Pty) Ltd – FSP 44760 WHEN the stock market plummets, or you hear the word “recession,” you may begin to question how your money is invested. Maybe you need cash for current expenses, or you’re tempted to sell investments before you lose any more money. There are a number of issues to consider. POLITICAL UNCERTAINTY IN OUR COUNTRY Until there is certainty (and confidence) in our political and economic future, we have no choice but to ride out the uncertainty. And while political risk remains a threat to our savings and investments, there is a little we can do about the situation. However, there is another threat but one that we can in fact control – our investment impulse. People tend to get quite nervous and in that state end up making huge financial decisions that can have far-reaching consequences. Fear not, though, as these ideas could help you manage the urge. KEEP ON INVESTING CONSISTENTLY While it is not good for any country, political and economic uncertainty will always exist to some degree. Basing the decision to invest or not to invest consistently on the ensuing political and economic climate can be detrimental to a financial journey and investors could potentially face the risk of retiring with insufficient funds, forcing them to continue working well past retirement age.Another reason to invest consistently is that there will be times in the market when the investor can actually buy investment units at relatively cheaper prices, as these fluctuate. There is also the danger of “timing” the market where investors may choose to enter the market at different points, which could be the point when the markets actually start to fall and immediately their investments would lose value. Timing the market could also mean that investors enter the market at a time when unit prices are in fact expensive. STAY IN THE EQUITY MARKET FOR A LONG TERM The equity market is probably the most vulnerable asset (or investment) class to political and economic upheavals. However, it is also the asset class with the highest return potential over time. Therefore, although it inherently carries more risk, it is the best asset class to beat inflation over time. Remember that inflation is probably the most dangerous destroyer of the value of our savings over time. There are several studies which show that investors end up destroying value by switching from equities into money market options during times of volatility and going back into equities during bull markets. Essentially, this means wilfully destroying inflation-beating return potential over time by playing this hop-on hop-off game. It’s important to look at your time horizon. If one is investing for a shorter period i.e. between one and three years, it’s advisable to look at bank investments or investing in stable funds with the insurance companies. DIVERSIFY, DIVERSIFY, AND DIVERSIFY SOME MORE This is definitely one of the most important principles of investing. It is a process of allocating one’s savings across a range of financial instruments (asset classes such as equities, bonds, property and offshore assets). STICK WITH YOUR PLAN Investing without a plan is tantamount to gambling. An investor’s investment or financial plan is their investment blueprint that should be constructed in such a way that the investor is comfortable with its strength during difficult market cycles (these are normal and are usually short-lived) and agility to tap into opportunities when these present themselves. This article is an excerpt from PPS Investments.You could contact me on 083 399 3905, my office at 032 944 3051/073 873 6927 or e-mail me on firstname.lastname@example.org for an appointment to discuss the above or further advice on any other financial matter. Disclaimer The information is only intended to be of a general nature and should not be relied upon by any part without obtaining full details from a licensed financial service provider.