Shares unsafe in short run

Johannesburg - Anyone who started investing in shares a couple of months ago with a short-term goal in mind, will be suffering from badly-burnt fingers.

The all-share index slumped by 46% since May.

The biggest declines occurred in October, when the index fell 23% to 17 812 points, before a small recovery took hold. The market ended the month 9% down.

This confirms yet again that anyone with a short-term goal in mind, even shorter than three years, shouldn't invest in shares, says Thobelani Maphumulo of Stanlib.

The performance of unit trusts for the six months to end-October provides more confirmation.

Index funds and unit trusts focused on specific JSE sectors lost a lot of blood. Unit trusts focused on resources were especially hard hit.

According to Morningstar, the yields on resource funds ranged from -49.35% to -35.96% in the six months to end October.

Index funds also suffered in that time. Only funds with exposure to foreign bonds, currencies and interest-bearing instruments did well.

The returns delivered on these funds - ranging from 33.8% to 9.55% - were largely due to the slump in the rand.

Investors who can hold on to their investments for longer periods should benefit, however.

Over the past five years, the 274 unit trusts available to local investors returned an average of 99.24%, compared to -10.46% over the past year.

The top performers were funds invested in SA shares. None of the funds exposed to the local market delivered a negative income in that time.

The top performer over five years was the Sanlam Industrial Fund, delivering a return of 227.76%, compared to the weakest performer (Stanlib Gold and Precious Metals) with a return of 12.42%.

Since 1960, the JSE hasn't delivered a negative return for five years in a row. The returns for five-year periods were usually comfortably above 10%.

But in the 1960's, 1970's and in the 1990's, the JSE delivered negative returns on a couple of three-year periods.

- Rapport