The best investments to hold, to protect your wealth during volatile times
Equity Analyst at Momentum Securities Faheema Adia unpacks how women can take full advantage of the stock market
There is a lot of volatility across global and local stock markets this year due to high levels of inflation and geopolitical issues. At Momentum Securities, we expect things to get worse before they get better, given that several central banks across the world have begun to aggressively hike interest rates to cool elevated levels of inflation.
There are also some expectations of a global slowdown and recession. So, the question is, where can investors position themselves amidst all this volatility and uncertainty?
Gold is generally seen as a hedge against inflation and volatility, but is recently down from its previous highs, as it does not yield any interest amidst an environment that offers alternative high yield investment options. It is however considered a safe store for money in volatile climates, and therefore a commodity we recommend investing in for some safety, especially considering that the rand has weakened to over R18 to the dollar.
The other option we would recommend is to invest in inflation linked bonds. The coupon payment of these bonds is linked to inflation and therefore protects investors during inflationary environments. As a small investor there are several bond exchange traded funds available that you could invest in locally and globally.
In terms of equity, the best place to be positioned, in our view, is in the defensive sector. This sector is likely to fair better in difficult times. It includes non-discretionary consumer goods, healthcare and pharmaceuticals.
Another option is to invest in a Real-Estate Investment Trust (REIT), which is a good way to get exposure to the property sector without the drawbacks of investing directly in property. We like REITs because they are more liquid and have lower transaction costs compared to direct property investments. Our REITs of choice are Vukile Property Fund which is focused on townships and rural retail, and Storage Property Reit. We like Storage as it has exposure to both South Africa and UK growth.
Finally, we advise you to have a portion of your portfolio in a money market account, which is considered safe with yields linked to prime rates.
These are the asset classes we would recommend you have exposure to, to help protect your wealth during difficult market conditions.
ENDS
