Stocks, money markets or property
Date: 2008-10-17
Irrespective of the current market conditions, we still need to earn a living, save and create sustainable wealth. But where do you turn to when you need to preserve your hard-earned cash? The ones with entrepreneurial flare will in turn be asking about opportunities in this market. There’s no doubt that property still comes up tops when it comes to wealth creation and preservation.
When fuel prices increased drastically last year, there were rumours that this upward trend was fed by speculators who were stockpiling. Not a bad investment decision, one would think. But crude oil has recently dropped to a 17-month low, plunging to approximately $60 a barrel. I hope those investors managed to sell their stocks on time, or they are currently sitting with insurmountable losses.
Perhaps you’re more fortunate in that you’ve invested funds in foreign markets. With the Rand nearly reaching R12 to the US dollar, you are not in a bad position. However, one can just imagine the stress the threat of international financial markets possibly collapsing may have caused you. If it wasn’t for several governments jumping in and rescuing these institutions, many pensioners would be out in the cold.
With the Rand weakening 41,1% against the US dollar, the funds you saved in a local bank in the hope of taking a well-deserved overseas holiday have been reduced by an equivalent amount. Best you change your holiday plans to a local destination.
When last have you had a look at your share stocks or unit trusts? Diversity is the name of the game. Hopefully, not all your shares were affected to the tune of the overall 30% loss in our equity markets.
The latest buzz word in the market is “buy gold”, not in shares, but in good old solid gold bars. If you had followed this advice in March 2008, when gold was trading at $1 033 an ounce, you could now see yourself having lost approximately 30% of your capital, with gold trading at just under $700 an ounce.
And yet, some people hesitate to enter the property market because they are fearful of a downward trend. According to Absa’s latest housing price review, the nominal price growth in the middle housing segment was 4,7% year-on-year. Not a very good growth rate when one offsets this against inflation, which is currently around 10%. But in comparison with the other market disasters, property is still faring quite well and nowhere near the 30% to 40% declines of other investment vehicles.
If stability, sustainable growth and long-term wealth creation are what you’re after, property remains the vehicle to consider. When there is a slump in the equity markets, the property market gains momentum. Mimic the behaviour of successful property investors, which is counter-cyclical. Set the trend, don’t simply follow it!
Tess Rodrigues
Managing Director
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