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It almost feels like the news headlines are becoming louder every year, and investors will be forgiven for feeling hamstrung by an environment marred by uncertainty.<\/p>\n
Globally, the war between Russia and Ukraine continues but has recently been overshadowed by fear that the situation in Gaza could further escalate and ripple outwards. Meanwhile, former president Donald Trump, in spite of his obvious leadership flaws and despite finding himself in the midst of a highly publicised court case yet again, seems to still have enough support to find his way to the White House in the upcoming US election. At the same time, while many have firmly embraced the opportunities inherent in the latest artificial intelligence platforms, there is real concern about potential misuse, bias and its impact on jobs going forward.<\/p>\n
Speaking at a series of recent client engagements hosted by Absa Private Wealth Banking, Jeff Gable, chief economist at Absa, sketched a picture of a highly uncertain global environment. This \u201cnoisiness\u201d is reflected in the wide range of forecasts analysts are making for key interest rate, exchange rate and commodity variables (see below).<\/p>\n
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<\/h6>\nLocally, South Africans are awaiting the outcome of the election on 29 May with bated breath and yet, while there has recently been some reprieve with regard to load shedding, the reality is that most infrastructure needs significant investment to move a struggling economy forward.<\/p>\n
Gable notes that amidst all the turmoil and uncertainty, consumers have had a particularly difficult time, with spending patterns underscoring the pressure they are facing. Notably, the new vehicle market saw a significant swing towards \u201cvalue buys\u201d, with this segment experiencing a jump in market share from 6% in 2015 to 24% this year. For those consumers who took on debt in the aftermath of the Covid-19 pandemic, the jump of almost five percentage points in interest rates between the end of 2021 and 2023 could have an impact for a long time to come. And while the current expectation is that there could be some interest rate reprieve in the period ahead, consumers shouldn\u2019t expect large moves, he cautions.<\/p>\n
Where does this leave investors? \u00a0<\/strong><\/p>\n For investors trying to navigate this uncertainty, it is vitally important to have a clear understanding of their needs and desired outcomes and to find the best solution for their specific risk profile.<\/p>\n Risk profiling plays a crucial role in financial planning as it helps advisors to understand their clients\u2019 attitude towards risk and their capacity to withstand potential losses. It involves assessing an individual\u2019s willingness to take on risk, their financial goals, investment time horizon and their ability to rebound from potential setbacks.<\/p>\n Risk profiling also helps in determining the appropriate asset allocation strategy for a client\u2019s investment portfolio, allowing advisors to suggest an investment mix that aligns to the client\u2019s goals, while helping them to achieve the desired returns without taking on unnecessary risk.<\/p>\n But what does this mean practically? As an investor, how can you navigate a volatile and uncertain environment and \u201cweatherproof\u201d your portfolio?<\/p>\n Diversification<\/strong>\u00a0remains extremely important. By investing in different asset classes, sectors and geographical regions, you can reduce the impact of market volatility on your investments \u2013 when one asset class is performing poorly, other asset classes may perform better, helping to balance out potential losses. Practically, this means that if the risk you are taking in equities relative to the possible return or reward is disproportionate to the risk-reward profile for bonds, the allocation to equities should be reduced and the allocation to bonds increased in appropriate proportions relative to your risk profile.<\/p>\n Another important weather-proofing tactic is to start early with\u00a0comprehensive retirement planning<\/strong>\u00a0that takes your desired lifestyle and estimated lifespan into account \u2013 consider factors such as healthcare costs, inflation and potential long-term care needs.<\/p>\n In this environment it is also vital to try and\u00a0gain exposure to asset classes through alternative, innovative ways<\/strong>. One such example is structured products, which offers capital guarantees that ensure that should there be an adverse market event, investors\u2019 capital will be protected against capital losses. This can aid in reducing emotional decision making, which generally results in making poor investment decisions at inopportune times.<\/p>\n Finally, manage your\u00a0liquidity risk<\/strong>\u00a0prudently and ensure that your expected drawdown requirements can be met within your current investment portfolio.<\/p>\n Ultimately, weather-proofing your portfolio helps to mitigate risks and protects your investments from the potential negative impact of market uncertainty, allowing you the ability to navigate through turbulent times more effectively.<\/p>\n Darren Ashton is head of Structured Solutions and Khanyisa Ngesi is head of Investment Solutions at Absa Private Wealth Banking.<\/em><\/p>\n<\/div>\n It almost feels like the news headlines are becoming louder every year, and investors will be forgiven for feeling hamstrung by an environment marred by…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-1713","post","type-post","status-publish","format-standard","hentry","category-innov8ions"],"_links":{"self":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1713","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/comments?post=1713"}],"version-history":[{"count":1,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1713\/revisions"}],"predecessor-version":[{"id":1716,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1713\/revisions\/1716"}],"wp:attachment":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/media?parent=1713"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/categories?post=1713"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/tags?post=1713"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Credit By: Darren Ashton and Khanyisa Nges<\/span><\/h6>\n","protected":false},"excerpt":{"rendered":"