In the physical Wanted magazine, I share a page with one of the country’s better-known fund managers, and as a result, I have largely refrained from addressing investment issues. Having an actual expert who manages people’s money for a living next door does feel a bit like putting a magnifying glass on my relative lack of knowledge.
But, like some readers of this page, I have a slight interest in the workings of the financial market. Most of us who are lucky enough to have semi-permanent jobs also have some kind of investment plan, and we would have been watching with different degrees of nervousness as stock markets have fluctuated widely since the Covid-19 outbreak really took hold in March.
In the days and weeks leading up to that cruel double whammy of the announcement of an initial three-week lockdown and confirmation that South Africa had indeed lost its last remaining investment-grade rating from Moody’s Investors Service, a different era seemed suddenly appealing.
I’m not old enough to remember final-salary pension schemes or the time of defined-benefit pension schemes. But when I started my working career, the world of pensions and investments was still rather opaque. You went to work and the employer deducted a certain amount towards your pension contributions.
The assumption was that this was all you needed to know and at some point, 40 years down the line, you’d find out how rich or poor the administrator of your fund had made you. There was an upside, of course, to this ignorance. What the markets did from day to day was nothing you had to bother yourself with.
Now, we have not only the internet, but also previously unthought-of levels of transparency with regard to how our funds are managed.
In these uncertain times, a lot can be said for blissful ignorance
Though professionals like Paul Theron will tell you that it’s a bad idea, who can resist taking a daily peek at what’s happened to their theoretical wealth when all it takes is a password and an internet connection? To make things worse, nowadays you can simply log into funds and change the allocation without as much as consulting a financial adviser.
And anybody who was looking around April would have been horrified. But by the middle of June, things started to look good, really good. And those trigger-happy souls who had switched to cash or other safe assets in the middle of the onslaught were kicking themselves.
With every economist becoming a Dr Doom, the JSE being down just 6% for 2020 didn’t seem so terrible an outcome. But wasn’t this also reason to be petrified? Surely this was a form of “irrational exuberance”, to borrow a term used by then US Federal Reserve chair Alan Greenspan back in 1996 ahead of the bursting of the tech bubble a few years later. If it’s too good to be true, it surely is, right?
And who knows what July and August will bring. Regulations that have given us greater control over how professionals manage our money and the resulting transparency has undoubtedly been good, not least in pushing costs of investing down, and possibly extending the years we can arrange in retirement as fund managers take less of our pots.
But in these uncertain times, a lot can be said for blissful ignorance.
• Mnyanda is the editor of Business Day.
• From the July issue of Wanted 2020.