Dear Investor,

In times of crisis, it’s natural for investors to react with emotion. Our most recent global crisis was the COVID-19 pandemic, but if we look back over the last 17 years, several major crises have already occurred—each triggering emotional reactions from investors.

When a crisis hits, investors often withdraw money from their investments—commonly known as the market—and move their funds to money markets or other stable asset classes. Some even choose to keep their money under the proverbial pillow. This emotional response leads to a general market value decline, resulting in reduced investment values.

The problem with this approach is that it typically occurs after the initial decline in market value has already taken place. For instance, if your investment was valued at R1,000,000 but now shows R800,000, that R200,000 reduction is known as a paper loss. By moving your funds to the Money Market or storing them under your pillow, you transform this paper loss into a real loss.

Attempting to re-enter the market and recover those losses is nearly impossible. The key to successful investing during a crisis is to put emotions aside and maintain your position in the market. This approach is often referred to as a V-shaped recovery—when investment values dip sharply but then quickly recover as markets stabilize.

A prime example of a V-shaped recovery can be observed during the COVID-19 pandemic with two balanced funds: Allan Gray Balanced Fund and Coronation Balanced Plus Fund. Investors who remained invested throughout the crisis experienced a strong recovery as markets rebounded.

The takeaway? Staying the course during turbulent times can prove more fruitful than reacting impulsively.

Warm regards,