Anet Ahern, CEO, PSG Asset Management

Our biological reaction to physical danger is a ‘fight or flight’ response that narrows our focus to dealing with the issue at hand. The problem is that we often try to apply this kind of either/or thinking to other aspects of our lives that aren’t suited to this kind of simplification.

Volatile markets that fail to provide the returns investors are expecting, can stimulate a stress response. As a result, investors are tempted to take action by fleeing to perceived safe-haven assets. But rather than aiming to balance risks, or perhaps hedge for different outcomes, investors often adopt an ‘all or nothing’ position. For example, an investor may opt to switch everything into cash or completely abandon local equities in favour of offshore assets. And usually, these moves happen at the moments of maximum despair, when investors are most likely to sell low and buy high somewhere else.

Complex problems require a multi-faceted approach

Whether in politics or markets, it is easy to fall prey to the belief that there is a simple solution available to the current problem. Ramaphoria is perhaps a telling example of this – South Africans were so desperate that we pinned our hopes on a single individual. By now we should all know that our country’s problems are too complex and multi-faceted for one individual to fix.

In markets, we often see something similar play out. Currently, investors are pinning their hopes on the technology sector to ensure their portfolios will outperform. But investors may be well-served to remember we have been here before. At the time we called it the dot com bubble, and it took the Nasdaq Index fourteen years to recover.

The danger in positioning your portfolio for binary outcomes

There are dangers in positioning your portfolio for a single targeted outcome. Even if you get the main event right, markets could play out very differently to what you had anticipated. The Moody’s downgrade in March this year, for example, was widely anticipated, and yet the response from bond markets has been positive, with yields declining in the months following the actual event. While we have been programmed to expect the perpetual weakening of the rand, the currency has in fact strengthened, despite the downgrade and the Covid-19 induced economic malaise. While it is true that the currency is likely to weaken in the long run while inflation differentials remain, we should never forget that the rand has also in the past often sharply reversed trend, even when sentiment was poor and expectations pointed to further weakening. This happened in 2001, 2009 and 2016 (all periods which followed a crisis event). During these times, many investors took lump sums offshore when the rand was at its weakest.

The value of seeing the bigger picture

The more noisy our environment becomes, the more tempting it is to search for a simple solution that will provide a sense of comfort. But in investing, the reality is usually far more complex. Cash can absolutely provide a solution when you need to draw an income, or need an emergency fund, but it won’t meet your needs as a long-term investor. Offshore investments are a must-have diversifier in your portfolio, but there are great local investment opportunities that should not be overlooked, just because of fear – especially not when the bulk of your liabilities are still held locally.


Investment, at its best, is a never an ‘all or nothing’ game, and there are real dangers in searching for silver bullets. We constantly remind our investors that the best opportunities are found at the times of greatest discomfort and that a more considered approach is called for.