2018 has revealed how unconventional the world has become. In the conventional days one would predict the future with some certainty as past performance was a guide to the future.
Economics 101 sets out a principle in economic cycles. In a free market there should be as little intervention as possible. Since 2018 which was the worst crash since the great depression central banks have intervened like never before.
This has propped up a market which has run so far ahead of itself that it is now dizzy. Thursday this week signalled the toppling of the inevitable. For the past few years assets have performed negatively except for cash in South Africa (7%).
Conventional wisdom says it’s time in the market. This is probably more applicable if you are already invested as there is a cost to sell or switch. Unless ,however, you are invested in a tax free wrapper or a retirement fund which has no affect on the subsequent capital gains tax.
As unconventional as if seems, an option to consider is switching for the short term, your retirement funds to a money market fund. Immediately, you will lock in your capital with very little risk of losing it and enjoy positive returns off the back of our rising interest rates. Retirement funds and tax free savings accounts escape the capital gains tax implications so you protect value as opposed to unit trust and endowment investments.
For the risk averse this strategy will not harm you in the least. You will be investing in certainty for the foreseeable future positioning you to switch back when certainty is restored.
It must be emphasised that this is a short term strategy and should be reviewed along side your investment goals over time. If in doubt, talk to your financial advisor.