Stay in the market until it recovers

Isaac Moledi

Isaac Moledi

If you are a medium- to long-term investor of Satrix products, maintain your investments over this current difficult period and await the recovery in the market.

So says Mike Brown of Satrix Managers company.

Brown says although last year's financial turmoil in global markets took its toll on the JSE, resulting in all of the Satrix products suffering a decline in yearly performance, an option is to stay in the market, given the good historic performance of the JSE.

After a nearly five-year bull market, the FTSE-JSE Top 40 index peaked in May 2008 and a steep plunge in all areas of the local stock market ensued.

In these circumstances index tracking products such as Satrix, which reflect the exact movements of the main JSE indices, were not able to escape the fall-out.

Except the Satrix Divi, which sustained the lowest capital losses of about -7 percent, all of the Satrix products, including Satrix 40, Satrix Fini, Satrix Indi, Satrix Resi, Satrix Swix, suffered a heavy decline in yearly performance.

The Satrix Divi holds a portfolio of the best dividend paying companies, selected from a universe of the top 100 companies (by size) listed on the JSE.

According to Brown, investment wisdom suggests that companies that pay generous dividends will provide some downside price protection in periods of general market declines.

This, he says, appears to be supported by the performance of the Satrix Divi over the last 12 months.

Brown says despite last year's market plunge, the long-term Satrix investor has still been solidly rewarded.

For instance, Brown says Satrix 40 securities could have been purchased at below R7 a share in early 2003.

At current Satrix 40 share price levels and dividends of 255 cents a share that have been paid to shareholders since 2003, this results in a yearly return of some 24 percent between the bottom of the market in 2003 and today.