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Dawie Roodt: Market risk a reality

Cape Town – Market risk is a reality which doesn't call for panic, but investors shouldn't be foolish with their money, explains an economist in the wake of the market turmoil this week.

“Do not run out there and sell everything you have because you think the market is under pressure, because you’ve already done your homework, you’ve invested in products that suits your risk profile,” said Dawie Roodt, director and chief economist of the Efficient Group.

“You simply have to ride this out. It’s called the market; it’s called life.”

WATCH: Do not panic, don't sell everything you have, do your investment homework - Dawie Roodt

However, he said while market risk was normal, investors should not ever take institutional risk. That means: “Don’t give your money to someone you do not trust. Do not give your money to something you don’t understand. Don’t give your money that’s going to invest in a gold mine in the Congo. Don’t give you money to someone who gives you financial advice who you just met in the bar around the corner.”

Roodt said investors should understand their risk profile. “Understand what risks you’re prepared to take,” he said. “Know when and why you save. Once you understand your own personal risk, find a product that suits you (and stick with it).”

Don’t blame China only for downturn

The rand tumbled the most since 2011 on concern the plunge in commodity prices will deepen as China’s economy slows.

Roodt said while China plays a significant role in the economic downturn, the country is not solely responsible.

“The world’s financial markets and the world’s real economies have been in trouble for some time,” he said. “There were a number of imbalances in the world’s economy.”

He said the Greece debt crisis, the US as well as South Africa’s low economic growth were also to blame, but said “China was a trigger”.

The rand would have weakened less if the economy was performing stronger. “Don’t point a figure towards a specific country,” he said, adding that he would point fingers at central banks generally and governments globally.

There is a global risk aversion, he explained. “Nobody wants to take risk at the moment,” he said.

WATCH: Everyone's blaming the Chinese, but that's incorrect - Dawie Roodt on economic slump

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