COMMUNITY LIVING
The past is a good indicator of the future
The stock market has had its share of volatility in the past 20 years , with crashes in 2001 and 2008 , and the COVID-19 global crisis . Every time the market has crashed , it has also recovered . While it is important to remember that past performance is not a guarantee for future gains , it is a good indicator .
‘ What goes down will eventually come up again . You don ’ t know how long a bear market will take to rally . That ’ s why it is so important to put your macro-thinking cap on and stick to your long-term investment objectives ,’ said De Witt .
Stick to your medium- and long-term strategy
Instead of fretting over constant fluctuations , rather evaluate your returns over longer periods of time . The biggest mistake an investor can make is to sell when markets are down , as all you ’ re doing is locking in your losses . We want our money to last 20 – 40 years and we need to think along those lines – not 1 – 2 years .
Don ’ t cash out your living annuity and move into a life annuity
Living annuities and life annuities don ’ t operate in the same way . With a living annuity , you are obliged to draw a regular income on a monthly , quarterly , or annual basis . There are also legal limits as to how much you can draw . A life annuity is underwritten by an insurer and gives you a guaranteed income for life . If you cash in on your living annuity , you will face fees , tax and penalties .
‘ Many people are tempted to move to a guaranteed income , but you will lose money . Stick to your long-term plan . Rather speak to an accredited financial advisor and they will be able to assess your circumstances and help you get the most value from your long-term financial strategy ,’ said De Witt .
If you want to move to a life annuity , then do this when interest rates are at a high , not when interest rates are rising .
34 I N V E S T M E N T
‘ Market volatility is daunting , but it only becomes a problem when you liquidate an investment . That ’ s why most advisors will tell you to set up a rainy day ( emergency ) fund , which will prevent you from liquidating an investment when markets are volatile ,’ said De Witt .
Don ’ t reshuffle your asset allocation
Timing the market is best left to the professionals . Don ’ t go making important financial decisions based on tips or pointers you read online . Shuffling your asset allocation at the wrong time can lead to losses from which you won ’ t be able to recover . Rather make sure your portfolio is adequately diversified so that when volatility hits , you don ’ t have all your eggs in one basket . The losses from some investments will be smoothed out from the gains on other investments . Even Warren Buffet says : ‘ It ’ s not timing the market , but time in the market that counts .’ nmg . co . za