Investing in 2012

Okay, the 2011 results are in. The winner was a South African investing in the USA using the Rand. Why? because the Rand depreciated against the US$ by 18% and the Dow Jones grew 8.4% in $ terms. So, if you listened to everybody when they said you must take your Rands when it was trading at R6.80 to the US$ and invest it in Multi-National companies trading on single digit PE's in the US, you would have made close to 26% in Rand terms. Compare that to the 2.6% you got on the South African JSE.

Results

• SA Equities 2.6%
• SA Bonds 8.8%
• SA listed property 9%
• SA Cash 5.8%
• Dow Jones 8.4% in $
• MSCI World -5% in $
• MSCI Emerging markets -18% in $
• China -18% in $
• Europe -17% in $

We can see that nothing went well except the devaluation of Emerging Market currencies against the Dollar. Looking at 2012 I see a lot of volatility in equity markets and if we are lucky, mid single digit returns but I think that Europe will drag the bulls back every time they start buying shares.

The way to invest in 2012:

• Equities: phase money into the market over 6 month period if you have a lump sum or via a monthly debit order if you have a monthly surplus for the longer term.
• Cash: Interest rates will remain low but don't commit short term cash for volatile equity investments.
• Listed Property: Had a good run but I don't see value.
• Bonds: Rising interest rates will impact bonds negatively so do not over commit.
• Rand: We saw the Rand go from R6.70 to R8.90. Where it will go from here I don't know but it should stay at around R8 for the time being.
• International: Always important to diversify over the world. If you are a SA citizen, invest some money in the US and Europe. If you are a US citizen, invest some money in SA and other Emerging Markets.

I will be happy if 2012 is a boring year with moderate, yet consistent growth in equity returns. If we can consolidate worldwide to create a solid and trusted platform for better growth in 2013 I will be happy. I do however get a feeling that we are going to see another up and down year.

To end: Never stop investing. Trust your fund manager to select solid companies. Don't be greedy. Don't be fearful. Be patient, don't buy and sell too often. Never become emotional about your investment. Never retire, keep on earning something!

Good luck for 2012!