OPINION | The world is on its head, but the principles of investing remain constant
Given the current market backdrop, there is a lot of uncertainty that investors face both in local and global markets as we navigate 2022. The most powerful protection against market volatility and uncertainty is diversification within portfolios, saysIn the US, 2021 ranked as the ninth-lowest peak-to-trough drawdown in a calendar year out of the past 94 years of data.
If we look at the various asset class returns over the first quarter of 2022 there are a few stand-out points.Over the first three months of the year, we saw global equities fall by 13% in rands versus South African equities that are up 4% in rands. That is a 17%-rand differential in performance in just three months. There has been a lot of positive news coming out of South Africa recently.
This may alarm bond investors since market interest rates and bond prices typically have an inverse relationship , meaning higher interest rates generally cause bond prices to fall. With that being said - for bond investors, this is short-term pain for long-term gain. Higher yields mean higher future returns. While rising interest rates will cause bond values to decrease in the short term, eventually, the declines will be more than offset as bonds mature and can be reinvested for higher yields.