Current market confusion

The most remarkable thing that happened to the world economy as a result of 9/11 was . . . nothing.

What would have once meant a crippling shock to the system was absorbed astonishingly quickly.

So what are your options in the current Market Confusion?

• Consider moving into cash
• Do nothing and wait for the markets to settle before making any investment decisions
• Buy more shares and/or equity unit trusts at current discounted rates

Given the current volatility in market prices one thing is definite - it would be dangerous to switch out of your equity investment right now as you may exit at the bottom just prior to a rebound. Another consideration: inflation and taxes. Inflation, now at its highest in many years, erodes nominal returns from all assets while taxes affect relative returns from different assets. So cash may seem like the least risky and most comforting course of action now, but carries considerable dangers if this passive approach is taken for too long.

The key is to continue with the same investment strategy as your original investment objectives. As we have stated many times, one cannot time the market and it is therefore unwise to start panic-selling your shares or equity unit trusts to try and avoid losses on your investments. An often-stated phrase is that one cannot time the market but one must rather spend time in the market.

South Africa is of course not immune to the rest of the world, so when things go down - so do we. As reflected in yesterday’s early results after the US Republicans and Democrats rejected the government’s $700-billion bank bailout plan. Resulting with the Dow slumping nearly 778 points, the biggest single-day point loss ever. The professional consensus is that sanity should prevail and the bailout plan will, after some ‘political shuffling’, once again go ahead.

Silke Financial Services advocates that long term investor’s stick to their disciplined investment approach as their personal goals and objectives have not changed. Good buying opportunities are now ever-present. Clients investing in equity unit trusts should keep on investing as lower equity prices means that you will earn healthy profits in the long term. Your patience will be handsomely rewarded.

Silke Financial Services has the skill and expertise to construct a well diversified portfolio to suit all risk profiles according to a client's investment time horizon.

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