It’s the start of a new year — and a new decade, so you’ve probably started dreaming of everything you hope to accomplish over the next 12 months…and the next 10 years.
If being a savvier investor is on your wish list, consider these investment strategies. And keep in mind that the sooner you start, the sooner you can start learning and hopefully get some good returns.
Perservere through hard times
Writing for Moneyweb, Patrick Cairns shares that there is an ultimate low-risk high-return investment for South Africans, but you need to give it enough time.
“Over the past 25 years, the JSE has been through three major downturns. There was the emerging markets crisis in the late 1990s, the dot-com crash in the early 2000s, and the financial crisis that hit in 2008.
“Despite these setbacks, the FTSE/JSE All-Share Index (Alsi) delivered an annualised return of 13.6% between January 1996 and November 2019. At an average inflation rate of 5.8%, this means that investors have earned real returns of 7.7% per year.
“This is an outstanding outcome for long-term investors. However, it’s likely that not everyone earned it, because to do so you had to have the stomach to sit out these events.”
Go against the norm
“To buy when others are despondently selling and to sell when others are euphorically buying, takes the greatest courage, but provides the greatest profit,” said Templeton Growth Fund founder John Templeton.
PSG Asset Management CEO Anet Ahern agrees that investors should remember that the best investment decisions are often accompanied by some discomfort and uncertainty.
The negative market environment in 2009 rewarded those who had the courage to invest then with a period of strong subsequent returns.
Focus on the income of your investment
The value of a company grows, over time, at the rate at which its profits grow, writes Preston Narainsamy, an investment professional at Marriott, on Moneyweb.
“In the same way, the value of an investment, over time, grows at the rate at which its dividends grow. Invest for the income while taking a longer term view on your capital, which can be volatile.”
Invest in shares that produce reliable dividend streams
Narainsamy also believes that certain companies will continue to produce reliable dividends regardless of global slowdowns, exchange rate volatility and declining interest rates.
“Nestlé is a good example of this. Consumers around the world drink on average 5 500 cups of Nescafe every second of every day. Other examples of Nestlé brands include Maggi 2 Minute Noodles and Kit Kat.
“More than five billion packets of Maggi Noodles are sold every year and 650 Kit Kat fingers are consumed every second of the day. Choosing to invest in companies like this will significantly reduce the risk of an investment outcome not meeting expectations.”