It is only natural to have some concerns - so, what does one do?

The remarkable turnaround in the equity market since 2008 is noteworthy, yet not unexpected. However the volatility seen in recent months has prompted numerous investment houses to take defensive positions as they feel that in some economies market and liquidity risks have increased to levels that could compromise financial stability if left unaddressed.

The October 2014 Global Financial Stability Report (GFSR) finds that six years after the start of the crisis, the global economic recovery continues to rely heavily on accommodative monetary policies in advanced economies. Monetary accommodation remains critical in supporting the economy by encouraging economic risk taking in the form of increased real spending by households and greater willingness to invest and hire by businesses. However, prolonged monetary ease may also encourage excessive financial risk taking.

The best way to safeguard financial stability and improve the balance between economic and financial risk taking is to put in place policies that enhance the transmission of monetary policy to the real economy-thus promoting economic risk taking-and address financial excesses through well-designed macro prudential measures. (source: imf.org)

So, what's Warren Buffett up to over past few weeks?

He is on record on CNN interview 2 days ago stating that he has "been very active during the sell off" and - this is probably hardly surprising bearing in mind he has often said that to be a successful investor you must be "greedy when others are fearful".

"I like buying it as it goes down, and the more it goes down, the more I like to buy," the 84 year-old Buffett said during an interview with CNBC last week. Though he wouldn't specify which companies he bought, he claimed they were "names you'd recognize."

If you have savings or investments, it is only natural to have some concerns - so, what does one do?

• Keep to your investment strategies by aligning your investments with your Time Horizon Goals. The type of investments you choose will depend on whether you are saving for long-term or short-term goals. Your time horizon is the expected length of time you will be investing in order to meet your goal. Determining your time horizon will help you decide which types of investments are appropriate for you.
• For your long-term goals, you may want to consider an active management approach which aims to generate the maximum possible investment return. With this long-term view of your investment there is no need to try and take profits should the market be at exceptionally high or low levels. While risk sounds like something to avoid, there are definite upsides - greater risk offers opportunity for greater rewards. With a longer investment time horizon, you will be better able to recuperate from a bear market allowing investors to assume more risk and hence greater returns.
• If you have a short term investment time horizon, you should stay in money market or stable fund. You will not want to invest in something that could cause you to lose your investment, regardless of how well the markets appear to be going.
• Determine the Silke Model Portfolio's required to achieve investment Time Horizon.

Investment Profile

Portfolio Allocation

Minimum investment Term

Silke Model Portfolio's

Long Term

Full Equity (Local/Offshore)

10 years

Silke MM Offshore Fund (Worldwide-Multi Asset-Flexible)

Silke MM Aggressive Fund (South African-Multi Asset-Flexible)

Medium Term

Asset Allocation [maximum 75% Equity]

5 Years

Silke MM Balanced Fund (South African-Multi Asset-Medium Equity)

Short to Medium Term

Low Equity

2 Years

Silke MM Stable Fund (South African-Multi Asset-Low Equity)

Short Term

Money Market

1 Year

Silke Cash Management Fund (South African Interest Bearing Money Market)

Short to Long Term

Silke Combination of the Silke MM Funds

Income for Life

Silke MM-Horizon Income Fund (Targeted Real Return Portfolio)

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• In addition to looking at your time horizon, there are other factors that you may want to consider. First, there is the 'sleep factor'. How much risk can you assume and still sleep well? You need to decide how much risk you can stomach before investing. The second is the amount of capital you have available to invest. You should never invest more than you can comfortably afford to be without during your time horizon. Determine an expected rate of return and inflation rate. Re-balance Portfolios Regularly. (Continuous monitoring allows us to recommend periodic adjustments to realign your overall plan with our changing outlook) Monthly unit trust investors must take cognisance of rand-cost averaging and not try 'time the market'. Investing on a monthly basis will buy more units of a unit trust when prices are low and fewer units when prices are high. Provided the fund gains value over the long term, you will profit from your purchases during short-term declines. When investing 'new' money, first consider your investment goal based on when you are actually going to need this money. Investors must remain disciplined and not interfere with their portfolios with long-term time horizons, so as to allow fund managers to unlock the real value.

Do not try and time the market! Often a few very good days account for a large part of the total return. By trying to time the market, one could potentially miss out on market rallies.

The chart below shows the relationship between a buy and hold strategy and the effect on your returns should one have missed 30 of the best days during the period:

The chart below shows the relationship between a buy and hold strategy and the effect on your returns should one have missed 30 of the worst days during the period:

Silke Financial Services - skilled risk and investment strategy consultants that provide a unique service offering not available elsewhere in the marketplace.