Investing & Money
piece written on the 31st July 2014 by  

I’ve read so many articles recently about the JSE and whether we’re in for a collapse of the market or whether we should continue riding the wave. The opinions are incredibly mixed from those seeing similarities to the 2008 crunch to those saying quite the opposite.

Today I was in a meeting and someone said that they believe it will continue to increase because the big players have too much invested to stop it from increasing and that lessons were learnt from 2008. He added a few more points to this to substantiate his thoughts and I must be honest, I tended to agree with him despite some of the negative articles I’ve read.

Just so everyone knows, this year the Top 40 shares are up 12.75% and if we look at the last year dating back to the end of June 2013, they’re up a whopping 35.15%. Furthermore, over the past 5 years the Top 40 has increase by 21.59% per year. These are really excellent returns for all investors, but if you’re investing directly onto the stock market you’ll be experiencing the best returns because you won’t be losing management fees either!

Going back to the 2008 collapse, which was the biggest collapse in several decades, one must note that the JSE only passed previous records at the end of 2013 and for the JSE to be a great investment vehicle it needs to keep growing strongly as it is – basically, although it’s surpassed previous records, based on current growth it really is still playing a bit of catch up.

Mike Brown, the MD of etfSA (a South African showcase of all the Exchange Traded Funds), offers his thoughts on the topic of the JSE and its position in this excellent 5 minute video:

He talks specifically about the Price to Earnings (PE) ratios, if you want to look into that a bit more click here.

One person commented on this saying, “Of course it is too high, no matter how Brown or anybody else try to soft soap it. And in years to come, how many will again sit and scratch their heads and wonder: Why on earth did we not see this coming?” – That’s a very la la comment, but it certainly is something to keep in mind!

I’m not an expert, nor have I been trading on the JSE for a long time, but this whole topic is really important and if we’re investing on the JSE we need to stay abreast of what’s happening. We might not be able to predict a collapse or the likes, but if we’re following closely and shares start to drop substantially, if we’re following we can get out with less loss than those who wait to hear the 8 ‘o clock news when it’s effectively too late to pull their stocks! Read that again, news travels quickly, if you receive it first your losses will be substantially less.

To close things off, let’s reuse a mantra: In the long-run, the age old mantra is true, get invested and stay invested.