The COVID-19 pandemic has generally wreaked havoc on individuals’ finances in South Africa and across the globe. It can be said that it’s highlighted the need for everyone to consider having an emergency fund to buffer financial uncertainties; the rule of thumb is to typically have three to six months’ worth of your living expenses saved in an easily accessible account. In addition, it may have sparked an emotional behaviour where people are keeping money in cash, rather than investments due to market volatility.
Lockdown forced a reining in of spending due to the closure of consumer hubs such as restaurants and malls. Typically, many people also saved money on day-to-day costs, such as petrol. It could be argued that the window of curtailed spending prompted people to re-evaluate their spending patterns.
At this point, investors’ post-COVID-19 habits are largely unknown. However, it can be deduced that owing to the pounding the economy has taken, buyers’ spending may fundamentally change for an indeterminate number of months; so too could people’s saving habits.
Where would it be best to invest given current market conditions?
Investors may consequently have extra funds, possibly from deferred spending or other avenues. The Association for Savings & Investment South Africa (ASISA) seems to support this statement by showing that many investors may be favouring safety of money, shying away from risk even though interest rates have dropped.
While it may be plausible that investors may currently be more risk-averse, those who may be looking for long-term growth should expose a portion of their portfolio to assets such as equities which can deliver growth over time.
Also, investment managers may explain to investors that they shouldn’t overlook the potential benefits of offshore investment. It can open doors to different economies, demographics, as well as access to sectors that are possibly not available in South Africa. Furthermore, it can protect your portfolio from any weaknesses in the rand and safeguard the buying power of your investments.
However, blindly investing offshore can be very expensive because you’re using a weak currency to invest in offshore assets. So, your decision to invest offshore should be a part of a long-term investment strategy.
It’s best to consider how much of your investment portfolio you want to place offshore, and what you want to accomplish. Based on this calculation, devise a plan to invest as frequently as possible in sensibly selected assets.
Contemplate getting advice from a financial professional
This information may be overwhelming. Should it be the case, think about speaking to an independent financial adviser (IFA). He/she can look at your portfolio and suggest appropriate investments that may assist you in achieving your goals. He/she can also navigate you through times of uncertainty. The current economic circumstances are more than likely causing many investors to err on the side of caution. However, with the help of an IFA, you have a better chance of optimising your investments.
