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Investment value fluctuations – Financial adviser can assist with management of fear

In a recent ASISA media release, Leon Campher, ASISA CEO, shares that although South Africa is feeling the heat generated by the COVID-19 market turmoil, it is important to remember that the country prides itself on a well-regulated financial services sector that is globally recognised as one of the best. “The market volatility has been extreme and the rollercoaster ride may continue for some time to come, but if you (and your client) switch out of your unit trust portfolios now you effectively materialise what have been paper losses, “ says Campher.

He acknowledges that the pain felt by many investors who have seen the value of their investments decline in recent weeks is likely to be compounded by the emotional stress presented by the COVID-19 pandemic.

However, says Campher, emotional reactions rarely lead to prudent investment decisions. “Just as Wall Street halts trading for 15 minutes to force traders to catch their breath and consider their investment decisions when indices drop by more than 7%, individual investors should reflect on the situation before taking decisions, preferably with the help of a qualified financial adviser.”

Campher advises that fear driven decisions will not deliver the outcomes that investors may be hoping for. He points out that while volatility is part and parcel of investing in unit trust portfolios that hold shares, it is important to remember that financial markets have historically not only recovered their losses after every crash, but they have also reached new highs.

But how do you manage the fear?

Campher states that investors should check in with their financial advisers to remind themselves of why they picked the unit trust portfolios that they were now concerned about. “If these investment decisions were taken for the right reasons and if you regularly review your portfolio together with your adviser, there is absolutely no need to make changes now. Rather ride out the volatility and even consider increasing your investment amounts.”

“Once you have invested in a unit trust portfolio or a combination of portfolios, a long-term commitment is required together with an understanding that it is time in the market that makes all the difference,” adds Campher.

“Our financial system remains robust and our institutions are highly capitalised and well positioned to withstand market shocks. History has also shown that our country and its people are resilient and react well in crisis situations. I am confident that we will get through this challenge as well, provided we stand together.”

As financial advisors you have a critical role to play in helping your clients make sound financial and investment decisions. In the midst of the uncertainty not an easy job, but it is best to help our client not to make an emotionally charged decision.

Click here to download the ASISA media release.

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