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Actively playing the long game: Lessons from investing our clients’ money through major crises

It’s our human survival instinct to seek safety in times of perceived threat. Being a successful investor over time often requires having to act against this natural predisposition. It’s easier said than done. Here are some key lessons on how to go about it.

Lesson 1: Cut out the noise

It’s easy to get caught up in negative news flow. The lesson in investing is that, as hard as it is, you have to take the emotion out of your decision making.

The winter of 2020 was an emotional and difficult time for all of us. Yet financial markets had already strongly recovered from the Covid-19-induced lows, with the local equity market gaining by a third in three months and global equity markets by even more. 

As much as the headlines were awful, and none of us felt very good, it was a time of great investment opportunity, with all the major asset classes (except global bonds) subsequently performing really well. 

Cut out the noise and rather focus on the price that you are paying for an investment asset.

Lesson 2: Play the long game, and actively

During both the Global Financial Crisis and the Covid-19 pandemic, the key investment decision you would have needed to get right was to aggressively buy equities at a time when they were trading at deeply distressed levels, even though your instinct may have been to seek the comfort of cash. 

At Coronation, after initially cutting our equity exposure going into the Covid-19 crisis, we conducted deep research which gave us the conviction to aggressively add to equity exposure across our portfolios at a time of maximum negative news flow. Focusing on cheap asset prices and taking a long-term view proved to be the correct decision on behalf of our clients. 

Lesson 3: Work as a team

You need to operate as a team to be able to make the best decisions in a world that’s changing at such a pace. Coronation is a team-based organisation, where we are surrounded by smart, experienced people who are willing to challenge each other, debate with each other, and leverage off each other. We are a team that is pragmatic about the world and adapts as the facts change, ultimately arriving at more robust and well-considered outcomes for our clients. 

Lesson 4: It’s only ever about our clients

Looking back and reflecting on the past, it’s clear that every decision we make is on behalf of those who have entrusted their life savings to us. Time and again, you learn the value that can be added to client portfolios through cutting out the noise, taking the emotion out of your decision making, operating as a team and playing the long game. These disciplines have remained central to Coronation’s DNA for close to three decades and have created significant value for investors in our funds. 

It remains a stressful time to be an investor. You face negative news flow every day, making it hard to fight those basic human instincts that want you to sell when the news is bad or buy when the news is good.

Whether we are asking ourselves if we should be selling because asset prices are high (and therefore present a higher risk of capital loss) or whether we should be buying because prices are low (and margins of safety are therefore high), what always anchors our decision making is remaining committed to disciplined, rational, informed long-term thinking that is core to our DNA. This approach has proven successful through major crises in the past and we believe will continue to enable us to navigate challenges on behalf of our clients in the future. DM/BM

To find out more about growing your long-term wealth with Coronation, visit coronation.com

Coronation is an authorised financial services provider.

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