Jul 17

Stay in the Market

Over the many, many years that I have been involved in the world’s stock exchanges many people have asked me what is the biggest investment danger of all?

In a simple and often repeated piece of advice, I repeat the words of a very wise and elderly broker for whom I worked back in the 198’s, he just said, the biggest danger of the stock market is not being in it!

Over the years I have seen people pull their money out of the markets and then lose their nerve about going back into it. It is as if by being out of the market they lost their investment nerve entirely. People pull money out of shares for the safer home of bonds and cash, but basically that is a mistake in the medium to long term.

The last hundred years have shown that there has never been a better home for your money and that is in spite of the many crashes, crumbles and corrections we have all been through or read about. Placing your money in bonds may feel smart and safe but if interest rates move against you then your capital can be quickly and seriously eroded. Placing your money in cash means you miss out on any capital growth and you are almost doomed to leave it there too long and miss the upturn as it occurs.

The last fifteen years have seen a tenfold increase in the ordinary share index, yes tenfold and that includes the troubled nineties and the E commerce melt down of the new millennium. Tenfold, yes that turns R10,000 into R100,000 and your R100,000 into a cool R1 million.

TOP, HALT, AND DESIST!! Before you do anything about the share market get professional advice, yes that means advice from qualified and regulated people. Ensure the person and the company they work for is registered with the FSB (Financial Services Board) and has a FSP number (Financial Services Provider), that number must also authorize them to talk to you about shares and unit trusts, not just life or short term policies!

So why are the markets so effective, if you take a medium three to five year view? Well one crucial difference between shares and residential property, where many have also made and now recently lost money, is a thing called the weight of money. No, this has nothing to do with how heavy a bag of five rand coins are!

No, it is all about what you, I and about two billion other people do without thinking about it every single month, we invest! Yes we do! We have retirement annuities, life policies, unit trusts schemes, direct debits, short term policies, pension funds and many other products, basically you name a type of saving or put away and the institution that receives those funds has to find a home for it. So every year billions if not trillions of dollars hit the share markets.

Come now, surely you did not think that Old Faithful Insurance or whoever else, had a dark room where the money grew like mushrooms, or they have a money tree that they fed with your mulched notes? No, it goes into the stock market and all that money is the weight that drives the markets!

So basically go and get someone to advise you, www.fsb.co.za will take you to the regulator and from there you can search for a regulated professional. Alternatively go to www.fpi.co.za, this is the Financial Planning Institutes site, they are all regulated and skilled individuals.

Me? Well after my alimony, school fees, medical aid, rent, car, WP and Everton season tickets I have just enough for that last great investment hope.
Excuse me Miss, can I buy two lottery tickets please?

Ian Kilbride  is approved in five jurisdictions including South Africa. He is Chairman of Warwick Wealth, the Kids Foundation and the Constantia Valley Association.

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