In partnership with Morningstar: Whether it is via a credit card, personal loan, or a home loan, most investors have experience with interest rates. When it comes to bonds and the impact of interest rate increases on investment portfolios, investors are often left scratching their heads. Bonds are used within investment portfolios to provide income, reduce risk, for growth, or for diversification purposes. However, as most central banks globally prepare to raise interest rates to stave off increasing inflation, some worry about the effects of these interest rate hikes on their investment portfolio.
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In partnership with Morningstar: On the South African front, the local equity market and the rand have been incredibly resilient. The FTSE/JSE All Share Index is up around +2% year-to-date (as at 28 March 2022) and the rand has strengthened by roughly 9% against the US dollar since the start of 2022. Across the globe, inflation and interest rates are heading one way and that is up. With ongoing global uncertainty and volatility, South African investors are left wondering what the implication of this global turmoil could be on their investments locally. In partnership with Morningstar: To quote the legendary Warren Buffett, “the investor of today does not profit from yesterday's growth”. As much as we have all heard the disclaimer on every investment advertisement that past performance should not be seen as an indication of future returns, many investors still switch to the latest hot offerings just before the inevitable slump in performance. In partnership with Morningstar: The father of value investing, Benjamin Graham, is quoted as saying that “in the short run, the market is a voting machine but in the long run, it is a weighing machine”. This advice is particularly appropriate in the current environment where markets appear especially interested in short term asset price movements and less focused on longer term fundamentals. On 23 February 2022, Finance Minister Enoch Godongwana delivered the annual budget speech, providing an update on South Africa’s finances. Low economic growth, vast unemployment, increasing debt levels, coupled with South Africa still being in a state of disaster two years since the start of the Covid-19 pandemic, all contributed to a complicated juggling act for the Minister of Finance. Given the unrest witnessed in 2021 along with weak foreign investment, the 2022 budget had to be geared not only to curb unemployment and to stimulate economic growth, but to also give assurance to foreign investors. In the words of Minister Godongwana “we need to strike a critical balance between saving lives and livelihoods, while supporting inclusive growth. This budget presents this balance”. In partnership with Morningstar: This document has been created to highlight the most important issues facing investors, share insights from our current research, and help you make better investment decisions as we enter 2022. It has been compiled by our investment leaders and draws on the work of our global team. |
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January 2025
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