Long-term not always so long

ALL investors want to see positive results virtually immediately and it is the fear of this not happening that stifles and immobilises investors to think about long-term security and take on risk, resulting in loss of capital.

ALL investors want to see positive results virtually immediately and it is the fear of this not happening that stifles and immobilises investors to think about long-term security and take on risk, resulting in loss of capital.

How many of us can really understand long-term periods of 10 to 15 years when it comes to investing?

Young people who started working in their 20s will look back 15 years and be reminded of primary school and they can still think of, and remember, all the pranks they got up to.

For those in their 40s, if they look back 10 to15 years, they are reminded of some major events such as:

The first democratic election in South Africa; the Rugby World Cup; Princess Di was killed; the Berlin Wall came down; the turn of the century and what was going to happen to all our computers and electrical appliances.

It does not seem that long ago does it?

Time does fly and investors have to understand that long term, essentially, is not that long. So for this reason investors should stop thinking about short-term investment decisions other than the need for emergency funds.

I have written about the enemies of inflation and taxation to those investors who remain invested in secure money-market funds without any real investment strategy. When you ask them why they remain invested this way, they say that they don't want to lose money.

Statistics published recently by Old Mutual reflect that after inflation the average annual returns were:

Over 40 years equities beat cash by 6,2percent. In the last 10 years, equities were 7percent and property 14,9percent higher than cash returns. However, there were years where investors were shell-shocked and followed the herd and panicked for fear of losing all their money. What followed was that astute, long-term investors picked up bargains at rock-bottom prices.

The concept of, and I quote, "That retail investors are often fearful when they should be greedy and greedy when they should be fearful", is just so difficult to get through to investors. Wealth is created by taking some risk, but at the same time, it is important to have a diversified portfolio, together with a balanced investment strategy.

My suggestion is that investors sit down with a financial adviser and do a financial-needs analysis. It is equally important to stop worrying about what scares you in the world and the investment scenario today.

You need to look at what's best for you over the long-term period. The majority of employed people already have some investments, even if only in their pension or provident funds. When doing an analysis, you need to get the current values to do the calculations so you can identify what still needs to be done.

Remember, time moves on and the years ahead will not go any slower than the years that have passed.

lThe writer is financial adviser of Bryan Hirsch Colley & Associates, email bryanh@bhca.co.za or helpline 011-880-4888.

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