MyMoney Online

Risky markets? Wax on... wax off...

The global markets are in turmoil. Growth is slow, emerging markets face a currency crisis, stock markets are trading at jittery levels. Is this this the time to buy or sell? Mr Miyagi, the wise old man in the movie, “The Karate Kid”, started Daniel out on his training by making him spend hours on a windshield waxing on and waxing off. This turned out to be a harsh but worthwhile lesson in patience. Daniel eventually got the idea not to rush things. He could also see things more clearly from then onwards.

If you really want to invest a lump sum into the risky share market you should exercise extreme patience by spreading into your investment over a period of time. The strategy is known as “rand cost averaging”.

Avoid risking everything

Many investments are unitised (Unit Trust). The price per unit is determined by the combined market value of the assets in the unit. Shares, bonds, property and cash are affected daily by their various trades so depending on how your unit trust is invested the price moves. In uncertain times when you do not know which direction your investment is heading you could reduce the risk of buying at the top by averaging your capital into the investment over time. If there is a sharp drop in the value of the asset then the next investment will compensate as you will be buying up the discount.

Averaging out also compensates

The current turmoil in the global markets present a high risk of losing capital in the short term. To reduce the risk you should spread your capital into your investment. Similarly, if you are already invested and of the view that markets are running too high then you should consider averaging out by selling off over a period of time.

Timing is perfect at end and beginning of the the tax year

There are capital gains issues on the disposal of the investment. However, if you get it right you could sell off until February 2016 which is the tax year end. You then use your capital gains inclusion rate of R30 000. If you then sell off more after February you use the next year's capital gains exemption.

Averaging in and out of your investments will reduce the risks of sharp price movements. The longer the time taken to average, the less the risk tends to be.

Listen to the conversation between Sam Cowen and Paul below:

Read more from Paul Roelofse at www.investforlife.co.za


702 welcomes all comments that are constructive, contribute to discussions in a meaningful manner and take stories forward.

However, we will NOT condone the following:

  • Racism (including offensive comments based on ethnicity and nationality)
  • Sexism
  • Homophobia
  • Religious intolerance
  • Cyber bullying
  • Hate speech
  • Derogatory language
  • Comments inciting violence.

We ask that your comments remain relevant to the articles they appear on and do not include general banter or conversation as this dilutes the effectiveness of the comments section.

We strive to make the 702 community a safe and welcoming space for all.

702 reserves the right to: 1) remove any comments that do not follow the above guidelines; and, 2) ban users who repeatedly infringe the rules.

Should you find any comments upsetting or offensive you can also flag them and we will assess it against our guidelines.

702 is constantly reviewing its comments policy in order to create an environment conducive to constructive conversations.

Read More
6 tips on how to avoid overspending this festive season

6 tips on how to avoid overspending this festive season

The Money Show’s Bruce Whitfield interviews Galileo Capital Personal Financial Advisor Warren Ingram.

3 shares you’ll do well to buy this week (by Cartesian Capital)

3 shares you’ll do well to buy this week (by Cartesian Capital)

It’s Stock Pick Monday on The Money Show. Bruce Whitfield interviews Cartesian Capital CEO Anthea Gardner.

3 shares that’ll grow you wealth, right now (First Avenue Investment Management)

3 shares that’ll grow you wealth, right now (First Avenue Investment Management)

The Money Show’s Bruce Whitfield interviews investment analyst Nadim Mohamed.

3 shares that should do very well, if you buy them now (by FNB Securities)

3 shares that should do very well, if you buy them now (by FNB Securities)

The Money Show’s Bruce Whitfield interviews FNB Securities Head of Research Chantal Marx.

Savings accounts with the best interest rates in South Africa

Savings accounts with the best interest rates in South Africa

Bruce Whitfield interviews Daniel Rubenstein, Co-Founder at MyTreasury – a tool that finds the best interest rate for you.

3 best shares to buy right now, while they’re hot (by Vestact Asset Management)

3 best shares to buy right now, while they’re hot (by Vestact Asset Management)

The Money Show’s Bruce Whitfield interviews Vestact Asset Management Portfolio Manager Michael Treherne.

Popular articles
7 tips on how to keep your child safe in public

7 tips on how to keep your child safe in public

Social worker and Childline manager Faiza Khota shares practical advise on how to help protect children in public spaces.

Soon you may not be able to light up in public (indoors or out!)

Soon you may not be able to light up in public (indoors or out!)

The Dept of Health is looking to introduce draft legislation that includes a complete ban on all smoking in public areas.

'KZN nudist beach would be a draw card for international tourism'

'KZN nudist beach would be a draw card for international tourism'

Chairman of KZN Naturists Association Christo Bothma says having the section of the South Coast beach will boost the economy.

New drug known as 'flakka' hits Durban

New drug known as 'flakka' hits Durban

Sam Pillay, founder and director of Anti-Drug Forum SA says once the drug takes effect, the user appears possessed.

The President's Keepers: PDF version is tantamount to theft - Exclusive Books

The President's Keepers: PDF version is tantamount to theft - Exclusive Books

A PDF version of the book has been doing the rounds since Sars and the State Security Agency threatened legal action.

Falling out of love? Signs and stages of romantic disengagement

Falling out of love? Signs and stages of romantic disengagement

Can you love your partner, but no longer be in love with them? Dr Eve unravels stages of disaffection in romantic relationships.

Celibacy liberated me - Amanda Ndiki

Celibacy liberated me - Amanda Ndiki

Author Amanda Ndiki, celibate for 6 years describes her journey and how celibacy helped mend her sense of self.

'The university degree is dead'

'The university degree is dead'

Flux Trends founder Dion Chang gives five reasons why he believes getting a degree is past its sell by date.