In September 2024, the average prudential balanced portfolio returned 1.8% (August 2024: 1.3%). The top performer is NAM Coronation Balanced Plus Fund, with 2.7%, while Stanlib Managed Fund, with 1.0%, takes the bottom spot. M&G Managed Fund took the top spot for the three months, outperforming the ‘average’ by roughly 0.8%. Stanlib Managed Fund underperformed the ‘average’ by 1.3% on the other end of the scale. Note that these returns are before (gross of) asset management fees.
The Monthly Review of Portfolio Performance to 30 September 2024 reviews portfolio performances and provides insightful analyses.
Avoid any permanent loss, but be prepared to give up value.
If you own something you do not use, chances are you will lose – “use it or lose it” is a rugby rule. It applies to all spheres of life. No one can take what you use from you if we equate ‘using’ to ‘consuming.
This wisdom also applies to your investments. Since you do not use your investments, chances are you will lose. This is not to say that you will permanently lose, but there will be times when you will lose. The best thing you can do is to be prepared for losing at times.
One also needs to distinguish between different types of losses, namely, temporary and permanent losses. You cannot recover a permanent loss as opposed to a temporary loss. To the analogy of a house: if you bought the house for N$ 1 million and the valuator now values the house at N$ 850,000, you made a temporary (or unrealised) loss. The market may pick up again in a year when the home may be worth more than N$ 1 million. However, if you sold the house for N$ 850,000, you made a permanent (or realised) loss. If you own shares in a company listed on the stock exchange and its price declines, it is only a temporary loss. However, it is a permanent loss if the company goes into liquidation (like Steinhoff).
Since we are dealing with pension funds and personal investments, in terms of market conditions, we find ourselves in a situation where we feel we have been on a losing streak for quite some time. But how do you define loss in these circumstances? Is it a loss relative to inflation, or is it a loss relative to the returns one has seen in investment markets until the advent of the financial crisis (GFC) at the end of 2008? I suspect many investors are still clamouring for past returns of 20% and more. Importantly, it should only be your above-inflation return; inflation should be your bottom line!
Where would you have invested had you anticipated developments in financial markets since the financial crisis? It was not too difficult to predict the impact of quantitative easing, the low interest rate environment, and the COVID-19 stimulus. Still, no one would have expected such a strong recovery for the four years since the GFC, followed by a flattening of financial markets afterwards.
What alternative investments could you possibly have made in anticipation of what was expected - property, life stock, vintage cars or other exotic objects? Well, test them one by one. Property in Namibia would not have been a good idea until the COVID-19 shock. Life stock in Namibia would have been a dull investment. Gold or any other exotic object?.
Read paragraph 6 of the Monthly Review of Portfolio Performance to 30 September 2024 for our views on investment markets and global political developments. It also reviews portfolio performances and provides insightful analyses.