{"id":2001,"date":"2025-04-28T08:55:53","date_gmt":"2025-04-28T08:55:53","guid":{"rendered":"https:\/\/www.innov8fs.co.za\/blog\/?p=2001"},"modified":"2026-03-18T11:46:05","modified_gmt":"2026-03-18T11:46:05","slug":"one-big-mistake-investors-make","status":"publish","type":"post","link":"https:\/\/www.innov8fs.co.za\/blog\/2025\/04\/28\/one-big-mistake-investors-make\/","title":{"rendered":"One big mistake investors make"},"content":{"rendered":"

Staying invested during times of market turbulence rather than switching to cash could mean the difference between R1.7 million and R10 million in retirement savings.<\/p>\n

\"\"<\/p>\n

Ninety One product specialist Marc Lindley recently explained that generating returns ahead of inflation is crucial for sustaining income in retirement.<\/p>\n

\u201cHowever, it is widely accepted that returns that exceed inflation cannot be achieved without taking risk,\u201d he said.<\/p>\n

\u201cThis discipline of holding the right proportion of assets to balance risk and return is easy to do when markets are rising; however, it can quickly be forgotten by investors during a crisis.\u201d<\/p>\n

Lindley\u2019s comments come in light of United States President Donald Trump\u2019s \u2018Liberation Day\u2019, which wreaked havoc on markets and resulted in equity losses in the trillions of dollars.<\/p>\n

The JSE All-Share Index shed 8.48% in the two days following Trump\u2019s announcement on Wednesday, 2 April, while the rand fell to record lows.<\/p>\n

He explained that, while drawdowns can be severe, inflexion points in the market can be equally rapid and pronounced.<\/p>\n

Uncertainty about the duration of the crisis and concerns over further market declines are likely to cause many investors to consider switching into \u2018safer\u2019 assets.<\/p>\n

However, Lindley pointed out that, historically, investors have risked a permanent loss of capital by switching to cash.\u00a0He used the 2008 global financial crisis and the Covid-19 pandemic in 2020 as examples.<\/p>\n

\u201cIt was not surprising that in such uncharted territory, industry views around the potential shape of the recovery varied, and concerns around another dip were rife,\u201d he said.<\/p>\n

\u201cDespite these concerns, the market recovered most of its losses in approximately 3 months. Those on the sidelines missed out.\u201d<\/p>\n

Lindley said this is something retirees should be particularly aware of, as those in living annuities face an extra challenge during these times.<\/p>\n

He explained that these retirees\u2019 requirements for income force them to make regular withdrawals, even at times when the capital value of their investments has been significantly reduced.<\/p>\n

\u201cMany feel that selling into weakness to fund their monthly annuity will have a negative impact on the sustainability of their income and therefore switch into cash to preserve the value of their nest egg,\u201d he said.<\/p>\n

\u201cWhile this instinct to try and avoid further capital erosion is understandable, in practice this behaviour often has the opposite effect to what was intended.\u201d<\/p>\n

He emphasised that simply preserving capital is not enough, because inflation erodes its value over time, and this effect is magnified when an investor also draws an income.<\/p>\n

Five scenarios<\/h3>\n

\"\"<\/p>\n

To illustrate his point, Lindley looked at a scenario where a client retired at the beginning of 2007, the year in which the global financial crisis began.<\/p>\n

This hypothetical client invested R5 million into a living annuity, drawing a 5% income with the rand value of the income escalating by inflation each year.<\/p>\n

Lindley then considered\u00a0five scenarios\u00a0<\/strong>using the Ninety One Opportunity Fund as the underlying investment:<\/p>\n