From a financial markets point of view, it has been one of the most hair-raising rides I have ever witnessed.
From political blunders and economic recession to sovereign downgrades; one would never have imagined that our stock market would be as resilient as it has.
Despite all the uncertainty, our local stock market has proved exactly why people invest.
Simply put, people invest to beat the price of money.
The main goal of investing is to try and get your money to grow faster than inflation, of course, to get more than what a bank would give you.
With a few days to go before we welcome 2018, our broader market looks to have all but achieved that.
At the time of writing this, our Allshare index has returned a touch over 13 per cent and the Top40 index just over 16 per cent.
What this means is that if you lazily invested in a product that simply tracks the performance of our top forty blue chip stocks, like the Satrix40, which you can easily buy through any broker, you would have beaten the bank by around six per cent – I’ll take that any day.
Index huggers win in 2017
At an individual stock level, 2017 has produced some big winners as well as massive losers.
Steinhoff’s recent fall from grace comes to mind as one of the biggest losers, but we have had several stellar performers to balance things out.
Kumba Iron Ore, for example, is on course to close out 2017 at nearly double the price it started the year (+93 per cent).
The ‘big boy’ of our stock market and major contributor to our market gains, Naspers, is still up around 70 per cent for the year despite the Multi-Choice debacle.
The market returns of this year prove that investing in our market does not have to be rocket science.
In fact, I would venture to say that most of the ‘clever’ stock pickers (including me) got caned this year compared to the overall return of the Top40 alone.
The next point I’d like to make is that by owning an index tracking product (index hugging), you do reduce your risk because it’s spread across all of the stocks that make up the index.
So even a Steinhoff-like event won’t hurt you too much.
By reducing the risk, you obviously give up a little of the upside potential too, but the point is, without getting clever this year, you would have made 16 per cent just by owning the Top40 Exchange traded fund (ETF).
Investors have all but shrugged off every bit of bad news that has transpired through the course of 2017 and that should be some wholesome food for thought for next year.
If our market so easily ignored the plethora of bad economic and political news this year, just imagine the potential when the headlines start to become more positive.
I would take another lazy, index hugging 16 per cent return next year with a smile.
Don’t forget that you are always welcome to get in touch by emailing me at robp@unum.co.za, but for now, as we ease into our Christmas celebrations, I’d like to wish you all health, wealth and happiness.
Benoni resident Roberto Pietropaolo, or “Robby P”, as he is known in the financial markets, is committed to educating you on financial wellness, investing, and general money matters.
He works for Unum Capital as a trader, investor, mentor and tutor.
He specialises in trading the short term derivatives market and longer-term equity or share market.
Also read:
Take advantage of new listings
It’s October and it’s a significant month for gold
Follow us on these platforms:
Like our Facebook page and follow us on Twitter.
For news straight to your phone invite us:
WhatsApp: 079 431 2006
Instagram: benonicitytimes.co.za
