Newsletter | September 2023 | Give Your Investments a Spring Cleaning

Clear out the Clutter 

Spring is here - this might be the season for you to log into your investment account and shake off any winter blues you may have experienced in your portfolio, and perhaps even take some profits on your winners as well. Your investment portfolio deserves some spring cleaning every now and then - and the new season may have given you some fresh ideas to apply in your strategy. Decluttering your investment portfolio allows you to think about consolidating some of your positions, review your investment goals and decide what to do with underperformance on some of your positions.

Spring Cleaning Your Portfolio

There are 99 exchange-traded funds, or ETFs, listed on the JSE, with seven different issuers that have split their offerings across 45 offshore ETFs and 54 local ones. Combine this with the well over a thousand available unit trusts, and you might find yourself spoiled for choice while also feeling overwhelmed by the vast number of funds. Your portfolio is not diversified if you hold more than one S&P 500 ETF from different issuers. Also, holding a Top 40 unit trust and a Top 40 ETF at the same time is also not diversification – as they track the exact same exposure. Make sure you compare fees too, as every investment has a cost – so shop around and get value for your money, both on low fees and good customer service, as this is often the differentiator between issuers offering the same index funds.

Always check your transactions so that you can report any activities that don’t make sense on your portfolio, or if there are transactions you don’t understand. Many people also tend to accumulate cash in their investment portfolio as the income would have come from their dividend payouts or interest. Make sure you reinvest these and also look into the option of automatically reinvesting any interest or dividends that get paid to you.

Lastly, do look at your asset allocation and see if it still matches your investment goals. Plans do change, and money that you were investing for the next 10 years might be needed next year – so in that instance you may want to move away from risky assets and invest in lower-risk funds like the Satrix Money Market Fund.

Red Flowers Turning to Green

While we all love a bit of colour, no-one likes seeing the colour red in their investment portfolio. Local equity markets experienced their worst decline this year over the month of August, with the FTSE/JSE All Share Index was down 4.7%. This was attributed to JSE-listed Resource stocks declining 10.1% during the month, while Industrials were down 4.9% and Financials down 1.8%. However, the importance of diversifying your portfolio came to light in August as the rand weakness made up for some of the gloomy international returns and pushed portfolios into positive territory as the rand depreciated by 6.5% to dollar. Although the Nasdaq was down 1.5% in US dollars, it closed the month up by 4.8% in rands. The S&P 500 Index was up 4.7% for the month while the Global Aggregate Bonds index was also up 5.0%, both in rand terms.

Cash returns were still mightier than inflation, with the STEFI Composite Index up 0.69% for the month, while local listed Property stocks were up 0.9% over the same period.

Scrutinise your Positioning

Balancing your needs with what you expect from your investment portfolio is very important. It allows you to understand your risk appetite, which then narrows down the list of funds you would like to invest in. It is also important to consider positions outside of normal equity holdings. The higher the percentage of equities in your portfolio, the riskier your portfolio - and together with that you should also pay careful attention to concentration risk on your share positions. For a shorter-term investment, consider a lower allocation to equities and look to adding other asset classes as well, like bonds, money market funds and inflation linkers. Also consider getting rid of positions that come with high costs, and consider more index funds which provide broad market exposure at low cost.

Disclosure

*Satrix, a division of Sanlam Investment Management

Satrix Investments (Pty) Ltd is an approved FSP in term of the Financial Advisory and Intermediary Services Act (FAIS). The information does not constitute advice as contemplated in FAIS. Use or rely on this information at your own risk. Consult your Financial Adviser before making an investment decision. Satrix Managers is a registered Manager in terms of the Collective Investment Schemes Control Act, 2002.

While every effort has been made to ensure the reasonableness and accuracy of the information contained in this document (“the information”), the FSPs, their shareholders, subsidiaries, clients, agents, officers and employees do not make any representations or warranties regarding the accuracy or suitability of the information and shall not be held responsible and disclaims all liability for any loss, liability and damage whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance upon the information. 

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