Volatile markets are a stress test of investment strategies

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Investors should be reassured that the buffers in their retirement savings have supported performance during the market meltdown

While the dislocation in financial markets is unnerving, it certainly is a good stress test of investment strategies. Evidence that your portfolio is working as expected is far more valuable than hearing that none of this volatility will matter in the long run.

Does derisking your portfolio work? No doubt the thought has crossed your mind: what if something like this happens just before I retire? Fortunately, it is not just about the JSE. Most retirement portfolios hold a variety of investments, which all react differently to the news cycle. A typical balanced high-equity portfolio will invest 25% to 30% offshore, mainly in foreign shares, providing exposure to different currencies, economies and sectors. Amazon, Alphabet , Apple and Netflix may not be listed in SA, but you probably own a piece of these companies anyway, through your fund’s offshore allocation.

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