Many pundits are saying there is no way we can expect to see the same kind of returns this year and I agree, sort of…
You see, the same ‘pundits’ are also not telling us to get out of the market.
They also aren’t saying “sell”.
I still believe that our market’s bull run is not over and while I agree that we may not see 19.6 per cent returns in 2018, that does not imply that we won’t see good gains either.
I think our market still offers the potential healthy returns come December that will exceed our current rate of inflation.
Emerging markets still look attractive to foreign investors and on the home front, we could very well be on the cusp of political reform that could stop the bleeding of our ailing economy.
The recent rand strength certainly suggests that turn-around hopes exists. But all that aside…
It’s not too late to invest in our market
The common mantra of “It’s never too late to start investing” certainly rings true today and 2018 will be no different.
It isn’t too late to invest in our market as long as you manage your expectations and have a slight change in strategy.
Rule number one of investing is to make sure you beat inflation.
In other words, beat the rate at which the price of stuff goes up.
The 2018 investment strategy
Every successful investor tweaks their investment strategy every now and then, but if you are a new entrant into our stock market, I refer you to my column of September 28.
There I discussed the correct way investors should invest in dividend paying stocks.
This year is not the year to look for stocks to shoot the lights out — most of them already did that last year.
This is the year to find shares that pay stable and rising dividends.
That’s where your real returns are going to come from.
Let me explain…
Every year, forecasts are made as to which blue chip shares are expected to pay the best dividends for that year and they are all put in a basket which can be traded as an exchange traded fund.
Now any investor can either copy what’s in the basket (index) or simply buy the whole basket exactly the same as trading any other share.
Now here’s the kicker — shockingly, last year, while the Top40 gave you 19.6 per cent, this dividend paying basket of shares returned 22.7 per cent for 2017.
Now I’m not saying that you should expect this return this time around, but what I am pointing out is, whatever the return on the Top40 may be in 2018, you could aim to beat it by around three per cent just by holding solid dividend payers.
That’s half of the ‘beating’ inflation job done.
That’s my bit for this week, but feel free to get in touch at robp@unum.co.za for any questions or comments.
For now I’d like to wish you all good fortune in 2018.
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