Remaining invested in volatile markets
This Newsflash does not apply to pensioners receiving a guaranteed life annuity from the Fund.
Concerned about world events impacting your Fund retirement benefits?
In short: Various global and local events have had a negative effect on economies and investment markets around the world. You may have seen the effect of this on your Fund Credit if you are a working member, or on your capital balance if you are in receipt of a living annuity. The important thing is not to panic, but to maintain a longer-term focus. Read on for more…
What you may be experiencing
- If you are a working member, you would have seen a drop in your Fund Credit in recent months.
- If you are a pensioner in receipt of a living annuity, you may have seen a reduction in your capital balance invested.
Why you would have seen a reduction in your Fund Credit or Capital Balance?
Currently the investment market movements have been very unfavourable, as a result of multiple factors including but not limited to:
GLOBALLY
Two years ago, we communicated how Covid-19 had severely impacted many aspects of our lives. Worldwide economies and financial markets are still feeling the effect of this pandemic. The current Russia/Ukraine war has again seen economies and financial markets reeling. Global financial markets had their worst performance over the first six months in a calendar year since 1970, due to intensified recession concerns on the back of extremely high inflation. The MSCI All-Country World Index (MSCI ACWI) posted a return of minus 15.5% in the first half of 2022 and a year-to-date performance of minus 20.0% in dollars, as poor performance in both developed and emerging markets affected the overall index.
LOCALLY
On the back of this unfavourable global outlook, our own higher than expected inflation and worsening power outages contributed towards local investment markets also being negatively impacted. The JSE All Share Index (ALSI) recorded a return of minus 11.7% for the quarter and a minus 8.1% year-to-date performance in rands.
These negative market movements would have had a direct impact on working members’ Fund Credits, as well as living annuitants’ capital balances.
What to do, and what NOT to do?
It is easy for panic to set in when markets are performing poorly and there appears to be no recovery in sight. However, this is the time for a strong focus on risk management. The risks brought about by the events outlined above cannot be eliminated, but they can be managed.
For working members, the Fund’s investment strategy has been designed to ensure that the portfolios are positioned to absorb market turbulence and minimise value-destruction, as you progress on your journey through the life-stage cycle towards retirement.
- If you feel comfortable with your own positioning in the life-stage portfolios, the optimal option is to remain invested exactly as you are. That is because research has shown that investment returns subsequent to market crashes exceed the losses incurred during the crashes. Investors who sold at the beginning of a crash would have experienced significant losses – losses that could have been recovered if they remained invested beyond the duration of the crash.
- However, should your circumstances have changed (such as a pending retirement or resignation) or you are unsure as to whether you are correctly positioned, it is imperative to talk to a Certified Financial Planner (CFP) to obtain expert advice on the management of your savings and your available investment choices in this regard.
- Please visit the Fund’s website www.debeerspensionfund.co.za to view the fact sheets of the various investment portfolios. The fact sheets provide valuable information on the investment approach, portfolio composition (asset allocation), historical performance and applicable fees with regard to each life-stage portfolio and the stand-alone cash portfolio.
Getting the right help at the right time could help you reach your goals and avoid an impulsive reaction that leaves you with savings that fall short of your needs.
Stanley Mathonzi
PRINCIPAL OFFICER
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