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Back to News A time to rebalance
1 Oct 2014

After trading weaker for most of the past 2 weeks the JSE recovered in the late afternoon yesterday to close flat as resources stage a moderate recovery from weaker levels.

The market shrugged off a much higher deficit on the trading account which send the Rand weaker but which only partially supported Rand-hedge shares, regarded by many analysts as overvalued.

The JSE remains tilted towards a weakening bias as some fund valuations normalised from overvalued position. The trade deficit data for August, as well as a downwards revision in the Chinese purchasing manager index (PMI) for September, did not help sentiment on the day.

Clients who have allowed us to diversify their portfolios as far as possible, into equal shares amongst the 4 Main Asset Classes:

- SA Equities 25%

- SA Hedge Funds 25%

- SA Property 25%

- Offshore Funds 25%

,will find that their SA Equity exposure had become underweighted over the past 12 months and we are now busy with a process of rebalancing. In other words we switch from their over weighted exposure in Offshore Funds and SA Hedge Funds to SA Equities. This process goes against the grain, that’s why you need a financial advisor with a category IIA licence to assist you with the process.

It is normal that all your instincts would shout against the process where you switch from the “good” to the “bad”, but properly diversified portfolios will beat unbalanced portfolios where all the eggs are in one basket, over the medium to long term. It is economical mathematically proven. It is as sure as 5 + 5 = 10, and we have witnessed the truth of it over and over again since February 1983.

Friendly Greetings

Andre Delport

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