Amid a global health crisis, investment performance worldwide has taken a beating and the impact has been severe.

The nature of financial markets is that they go through cycles of peaks and troughs. On occasion, the volatility can be drastic. It is during these extreme bouts of market instability that even the
most experienced investors can become anxious.

Investment performance has fallen to levels last experienced several years ago and there seems to be no recovery in sight. Often during these uncertain times, one is prone to make emotive decisions and head for the hills, cashing out investments and locking in losses.

The chart shows the history of the South African stock market, represented by the JSE All Share Index, when the market experienced a ‘crash’ and the recovery in market performance over subsequent years. In all the cases, except two, the 1-year return post the crash exceeded the losses during the crash.

Investors who sold at the beginning of the crash, would have experienced significant losses. Losses that could have been recovered if they remained invested beyond the duration of the crash.

The markets can be a scary place at times, but long-term investors should not panic. The gains experienced over the long term outweigh the losses experienced in the short term. Although historical performance is no guarantee for future outcomes, the historical evidence reminds us that the biggest price swings are rare occurrences that should not exaggerate the risk and uncertainty pinned on the anticipated long-term value of an investment.

Remember, investment goals are set with the future in mind. Therefore, staying invested for the long term is the best answer to an investment strategy that ultimately rewards.

Contact your investment consultant and weigh all the facts to ensure you make an informed decision.     

Source: Alexander Forbes Investment