{"id":2328,"date":"2017-08-07T00:00:46","date_gmt":"2017-08-06T22:00:46","guid":{"rendered":"https:\/\/contattolive.co.za\/north\/?p=2328"},"modified":"2017-09-21T12:35:02","modified_gmt":"2017-09-21T10:35:02","slug":"asset-allocations-post-downgrade-world","status":"publish","type":"post","link":"https:\/\/contattolive.co.za\/north\/asset-allocations-post-downgrade-world\/","title":{"rendered":"Asset allocations in a post-downgrade world"},"content":{"rendered":"

Before we chat about the current asset allocation environment, let\u2019s quickly roughly describe the term for those of us who may be unsure of what this means. Asset allocations broadly refer to the actual investment options – ie. when you invest money, it needs to go somewhere, and some of these options are called asset allocations.<\/p>\n

Since South Africa was relegated to \u2018junk status\u2019 by two credit ratings agencies, investors have witnessed some currency depreciation, a shaken local equity market and a jump in bond yields. However, the aftermath hasn\u2019t been quite as apocalyptic as some may have feared. This is mainly because the downgrades didn\u2019t come as a huge shock, and many people had followed advice to prepare in advance and structure their portfolios in a way that would handle an uncertain investment environment.<\/p>\n

Negative investor sentiment is still a major issue in South Africa, but fortunately, most people\u2019s long-term investment strategies remain relatively unscathed. An article by Moneyweb<\/a> summarises the current situation well, and provides some interesting insight to asset allocations.<\/p>\n

Here\u2019s a brief overview of some interesting considerations:<\/p>\n

1. Bonds<\/strong>
\nSince the downgrades, bond yields have seen a significant leap, but some investors see this as market overreaction and consider it as an opportunity to increase exposure to this asset class.<\/p>\n

It may seem contradictory to buy bonds at a time when many people are concerned about the government\u2019s ability to repay capital and service its debt, but some investors believe that the potential yield is still worth the risk.<\/p>\n

2. Geography<\/strong>
\nPost-downgrade, the South African Rand has come under pressure, but many investors believe that the currency is still strong enough to justify moving some funds offshore. If you have limited international exposure, the window of opportunity is arguably still open to add to your offshore assets.<\/p>\n

3. Equity<\/strong>
\nShare prices of companies that don\u2019t have a significant offshore component to their earnings, such as banks and retailers, have come under severe pressure in South Africa. It\u2019s, therefore, worth considering some exposure in your local equity portfolio to \u2018safe\u2019 Rand hedges that earn most of their income outside of South Africa.<\/p>\n

Since the credit downgrades, pockets of potential value have emerged in the South African market. It is challenging to get the timing right on these cheap local shares but they may provide nice rewards in the long-term if you do.<\/p>\n

In our post-downgrade society, it is important to not have emotional reactions to crises. Rather, you should maintain an active interest in your portfolio and stay true to your investment philosophy once you have ascertained your risk appetite and financial goals. Don\u2019t hesitate to arrange a meeting to discuss your asset allocations and investment opportunities in this post-downgrade environment.<\/p>\n","protected":false},"excerpt":{"rendered":"

Before we chat about the current asset allocation environment, let\u2019s quickly roughly describe the term for those of us who may be unsure of what this means. Asset allocations broadly refer to the actual investment options – ie. when you invest money, it needs to go somewhere, and some of these options are called asset allocations. Since South Africa was relegated to \u2018junk status\u2019 by two credit ratings agencies, investors have witnessed some currency depreciation, a […]<\/p>\n","protected":false},"author":1,"featured_media":2332,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12,13],"tags":[],"class_list":["post-2328","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","category-financial-planning"],"yoast_head":"\nAsset allocations in a post-downgrade world - Contatto North<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/contattolive.co.za\/north\/asset-allocations-post-downgrade-world\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Asset allocations in a post-downgrade world - Contatto North\" \/>\n<meta property=\"og:description\" content=\"Before we chat about the current asset allocation environment, let\u2019s quickly roughly describe the term for those of us who may be unsure of what this means. 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