The world is currently a very interesting place as far as global politics are concerned. The outcome of a coin toss might mean that the US gets Donald Trump again. Is that a good thing or not? How do the US elections affect our investments? Or Brexit for that matter. Or local politics?
Closer to home, the COVID pandemic and our response to it has also created a lot of talk and speculation about the future of the country. The rife corruption, huge increasing debt and failing SEO’s that need bailouts are all cause for concern. And what about Regulation 28 that affects your RA’s? So much to think about (and stress about).
One does not need to be a political analyst in order to know what these events should mean for your personal finances and retirement ambitions.
There is always risk, and always reward.
Remember that in the world of long-term saving and investing, there will always be volatility. Stock markets will go up and down, as will interest rates, our currency, and the cost of almost everything.
Risk is needed to adequately reward long-term savers like yourself, and to allow you to earn a real return. Without a real return, compounding interest, you may as well try to buy a movie ticket and popcorn with an old R2 note from 1982.
Risk is to be embraced, but only because you’re able to manage your risk, through smart and over-used strategies like “diversification”. It’s over-used for a reason – because it works.
Don’t lose sight of the money forest because you’re watching the money tree.
It would be incorrect to say that major changes to a financial or political system cannot mean a change in the fundamentals that drive that system. Think of how the global crisis of 2018 or the recent COVID pandemic has impacted your investments. The US elections and other world politics will almost certainly have some effect on your investments.
You’ll drive yourself nuts though if you spent every waking moment worrying about what Venezuelan hyperinflation or striking Greek rail-workers might mean for your long-term savings.
Understanding the fundamentals of long-term financial planning, means that you can largely ignore these events and focus on sound financial planning principles.
Three real ways to take advantage of the volatile political climate.
- You could take advantage of Donald Trump’s Mexican border wall by buying shares in a US cement plant. OR you could revisit your investment strategy by scheduling an appointment with a financial advisor and have them consider if it’s still appropriate and aligned to your long term requirements.
- Capture the market panic of a Brexit by hoarding your money under your mattress. OR appreciate the benefits of some well-considered offshore exposure in your investment portfolio.
- If you’re paranoid about South Africa’s political future, stock up on barbed wire and kerosene for your apocalypse bunker. OR consider the benefits of a well-constructed emergency fund, knowing how much is enough to let you sleep at night.
Stay the course: keep your blinkers on.
To fixate on what might change the value of your invested money will most likely introduce an element of speculation into your diet. Speculation is not to be confused with investing. Few of us feel like we have enough time for those things that keep even the basics in our life on track, let alone worrying about every global event or US elections that has the potential to ruin your planned Mauritius holiday in 2021.
Nobody knows what the markets are going to do. That doesn’t imply paralysis, nor does it mean everyone’s doff. It simply allows fortune to favour the prepared.
A long-term view
Think about all the turmoil the world has seen over the past 50 years. The US elections is nothing in comparison to some of the catastrophic events that have happened. Now consider those who started investing 50 years ago. Their portfolios are probably looking ok. Much better than had they simply stored their money under a matress.
With a long-term view in mind, invest without emotion and speculation. Things, over the long-term, will probably work out ok. And if they don’t, well, there’s nothing you and I can actually do about it.