Panic hits the market - what you need to know

What a week this has been! On Monday, the JSE ALSI lost 7.88% followed by further losses on Tuesday. Developed markets and Asian Markets have not been spared either with similar losses across the board. By Wednesday the SA Rand depreciated to over R9 to the US Dollar, a level last seen in 2002.

A number of our clients have been looking for guidance as to how they should react to the current market downturn and the recession in the USA.

We cannot hazard a guess as to how long this downturn will endure and no financial expert has any idea as to when sanity will return to the markets. We concur with the views of Alphen Asset Management that the end will be in sight when the US property market stabilizes in a meaningful way and when liquidity levels rise again in the financial system and banks feel confident to transact with each other and with borrowers in a conventional way.

Despite all the negative news we are hearing, we feel that we need to provide our clients with proper guidance. As we have often stated, you must compartmentalize your investments according to your ‘time horizon’. Short term investment should be allocated to a Money Market Fund. Money set aside for the long term must have exposure to local and offshore equity.

We have been asked to provide a view with regard to how a lump sum investment for the long term should be invested. As there will be market turbulence in the next 12-odd months we suggest a phased-in approach to the equity market over the next 12 months, bearing in mind that with world growth slowing it could take in excess of 5 years to start seeing a return on your investment. Should you wish to invest a lump sum please email us for more information.

Existing investors are advised as follows:

• If you are in the market, remember your original objective and stick to it
• Do not sell your long term or retirement investment in a panic
• Monthly investors should continue - or even increase - their debit orders to take advantage of buying at unprecedented low prices. Should you wish to increase your debit order please email us for options.
• If you are near to retirement it is time to re-balance your investments

The very wise words of Sir John Templeton are appropriate at this time:

February 1994
‘Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.’

Silke Financial Services advocates that long term investors 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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