I attended a presentation many years ago where several speakers from investment management companies shared their thoughts on the markets and how factors affect (or don't affect) their decision-making when it comes to portfolio construction. One of these speakers mentioned that at one point, the JSE dropped by as much as five percent, but based on the information available to him, he did not engage in panic selling out of equities. His exact words were: "There was no noise".
That statement reminded me of the story of the 2,000 stripling warriors. To summarise, their parents had vowed never to again fight in any wars, and they were determined not to break that vow even though they were now under imminent attack from their enemies. The children (now teenagers and young adults) who had not made that vow volunteered to go and fight so that their parents would not have to break their vow. In the end, these young men won the battle, and none were killed. When asked how they had accomplished this, they answered that they did not doubt they could win because their mothers knew they would. Their mothers were the source of their certainty and confidence that led to their eventual victory, despite their inexperience.
I regularly speak with Paul Marais of NFB Asset Management. He's well-versed in what is happening in all facets of his chosen sphere. If there is anything worth knowing about events that can or will affect financial markets, I will most likely hear it from him. He often has to make decisions that will impact numerous investors, and he does so decisively. His certainty comes from the hours of work he has put into research and due diligence. He has looked at reams of macroeconomic data and analysed historical patterns. Based on that information, he will recognise which market movements warrant a reaction and which can be 'silenced' by what he knows.
What is your source of certainty as an investor when there is a lot of noise in the market?
How do you remain calm and carry on with your investment strategy? Do you stay calm? Or does your relative inexperience cause you to panic and pay attention to all the noise around Eskom, the currency, or the socio-economic situation? Do you pay attention to what is shared around the braai on a Saturday? To whom do you look to silence the noise?
You can always look to your financial advisor to temper your reactions and silence irrelevant noise. NFB Asset Management does many hours of due diligence on various funds, including intensive research and fund manager meetings to understand their asset allocation strategy and find the intersect with NFB's investment philosophy. After that, the team decides where to place your capital based on your stated objectives and ascertained needs.
If you trust your financial advisor and understand the reasons for their certainty, you will invariably remain calm in the market storms that will arise from time to time.
In times of market volatility and panic, you need to partner with a team that does the obvious things well so that you can rest assured. Allow your certainty and calm to come from ours so that you, too, hear no noise and stay the course to achieve your investment objectives.