Money Mindset

The world is imploding and so what

What Donald Trumps election means to me

The world is currently a very interesting place as far as global politics are concerned. The outcome of a coin toss might mean that the US gets Donald Trump as its next president, while the working class within Great Britain have made their voices heard, ushering in Britain’s exit from the European Union.

Closer to home, our recent local municipal elections have created a lot of talking points around what kind of populist policies the ruling party might now try and introduce in an attempt to regain some favour with voters. International investors don’t typically enjoy surprises, which is why the concern is that, in an attempt to influence a political outcome, good judgment and sound economic policy might go out the window.

One does not need to be a political analyst in order to know what these events should mean for your personal finances and retirement ambitions.

There is always risk, and always reward.

Remember that in the world of long-term saving and investing, there will always be volatility. Stock markets will go up and down, as will interest rates, our currency, and the cost of almost everything we spend our money on.

Risk is needed to adequately reward long-term savers like yourself, and to allow you to earn a real return. Without a real return, you may as well try to buy a movie ticket and popcorn with an old R2 note from 1982.

Risk is to be embraced, but only because you’re able to manage your risk, through smart and over-used strategies like “diversification”. It’s over-used for a reason – because it works.

Don’t lose sight of the money forest because you’re watching the money tree.

It would be incorrect to say that major changes to a financial or political system cannot mean a change in the fundamentals that drive that system or that exogenous shocks to the world (think 2008 global crisis) won’t impact your near-term financial achievements (or failures), but what you should recognise is that if you spent every waking moment worrying about what Venezuelan hyperinflation or striking Greek rail-workers might mean for your long-term savings, then you’ll end up driving yourself nuts.

Understanding the fundamentals of long-term financial planning, means that you can largely ignore these events and focus on sound financial planning principles.

Three real ways to take advantage of the volatile political climate.

  1. You could take advantage of Donald Trump’s Mexican border wall by buying shares in a US cement plant, OR you could revisit your investment strategy by scheduling an appointment with a financial advisor have them consider if it’s still appropriate and aligned to your long term requirements.
  2. Capture the market panic of a Brexit by hoarding your money under your mattress, OR appreciate the benefits of some well-considered offshore exposure in your investment portfolio.
  3. If you’re paranoid about South Africa’s political future, stock up on barbed wire and kerosene for your apocalypse bunker, OR consider the benefits of a well-constructed emergency fund, knowing how much is enough to let you sleep at night.

Stay the course: keep your blinkers on.

To fixate on what might change the value of your invested money will most likely introduce an element of speculation into your diet. Speculation is not to be confused with investing. Few of us feel like we have enough time for those things that keep even the basics in our life on track, let alone worrying about every global event that has the potential to ruin your planned Mauritius holiday in 2020.

Nobody knows what the markets are going to do. That doesn’t imply paralysis, nor does it mean everyone’s doff. It simply allows fortune to favour the prepared.

The Editors

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