World events and investor behaviour - do not panic!

"2011 has been a tumultuous year thus far."

Widespread demands for proper democracy in the Middle East, starting in Tunisia and through Facebook and Twitter spreading to the inspired youth - the revolutionary toppling of the Egyptian Government stimulating a number of revolts in neighbouring Arab Countries.

Tragic destruction of buildings and loss of life in the Christchurch and the most recent Japanese earthquakes. On Friday 11 March the world witnessed the sixth largest earthquake that's ever been recorded since seismographic records began in 1900 resulting in a Tsunami breaking over the North East Coast of Japan with devastating effect. The destruction caused by the Tsunami is, at the very least, mind-boggling in terms of what Mother Nature can unleash.

In the interim, it is hard to assess how the damage could filter through and impact on global markets and South Africa specifically. All that we have is past market behaviour to rely on. In 1995 Japan was hit by the Hanshin Earthquake, during which the market lost 8% in 6 days and then recovered those losses over the next few weeks. Although valuations were very different then, what is clear - markets do recover .

Amid the destruction, there are already some winners among Japanese stocks. Construction shares surged yesterday on expectations of booming orders to rebuild north- eastern Japan, pushing the construction sector index up 6.4 percent.

So, what must we DO and REMEMBER in this current environment?

• One cannot time the market, so (1) don't panic, (2) stick to your original investment goals and (3)do not be swayed by the "otherwise" media and negative soothsayers
• Whenever markets gyrate, it gives qualified fund managers and analysts the opportunity to find new "investments" at discounted values
• Fund manager strategies and overall portfolio construction shouldn't necessarily have changed overnight! We would be worried if managers now started changing their "intellectual-investment-ideas". Fund selection and overall asset allocation construction is based on intrinsic value. IF values are affected in the short term, these should revert back to original fund manager valuations. Intrinsic Value Definition: The actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors. This value may or may not be the same as the current market value. Value investors use a variety of analytical techniques in order to estimate the intrinsic value of securities in hopes of finding investments where the true value of the investment exceeds its current market value.
• And lastly... 'Individuals who cannot master their emotions are ill-suited to profit from the investment process' - Quote from Benjamin Graham

Silke Financial Services has the expertise to advise on investment strategies to suit investor circumstances, preferences and time horizons.