All the answers to your unique business lifestage questions
- Player: Mark Appleton
- Organisation: Ashburton Investments
- Position: SA Head of Multi Asset and Strategy
- Contact: +27 (0)11 282 8800
- Visit: ashburtoninvestments.com
How has the investment landscape changed over the last 12 months?
There is no doubt that the global and local economic outlook has become more uncertain over the last year, or so. Global economic growth forecasts have been reduced, and here at home the growth outlook has also deteriorated quite a bit.
Meanwhile, the local consumer is under pressure from a weak economic backdrop and a rising interest rate environment. Corporate profitability is also under pressure, which detracts from valuation support for risk assets such as equity and property.
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With the rand in its current precarious state, should investors be buying offshore?
Offshore diversification always makes sense when you consider the fact that South Africa is such a small part of the larger global market. So, with this in mind, going offshore will typically improve your overall risk-reward profile. Having said that, though, predicting the rand in the short term is a notoriously difficult exercise.
While the rand is likely to remain fragile — in as much as it represents a fragile economy — there is no doubt that it is in a volatile phase and could well show bouts of occasional strength. The important thing is not to panic and act rashly. You shouldn’t be too reactive. In our experience, it is never a good idea to panic and resort to an investment based purely on fear.
How would you advise entrepreneurs (who obviously have a lot of money tied up in their businesses) to go about investing? What would be a solid investment strategy with regards to diversification and risk mitigation in the current economy?
Entrepreneurs are risk takers, but they typically take calculated risks. Also, they often depend on their businesses for wealth creation. Investment is adopted as a way of preserving wealth — not creating it.
Typically, when entrepreneurs give any excess capital to others to invest, they tend to have a capital preservation bias, and not look to adopt any high-risk investment strategies outside of their businesses. This is a strategy that still makes sense. Now is not the time to adopt an appetite for risk when it comes to investing.
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How has the current economic situation impacted investment strategies?
Balanced strategies have responded to a higher risk outlook by reducing exposure to risky assets. Of course, there is a price for everything, but right now local equities look a little on the expensive side relative to their earning potential.
In your opinion, what are some of the best/safest ways to invest now?
The old adage of not putting your eggs in one basket rings very true now. A long-term diversified investment strategy with varying exposures to the different asset classes from time to time has typically served investors well over time. This approach is timeless, and it is particularly prudent now.
The answer doesn’t lie in taking all your money offshore, or any other reactive strategy, for that matter. As always, you want to diversify and build up a balanced portfolio that includes multiple asset classes.
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