Beware of human nature


The increased visitor traffic to the Grand Canyon the year after the motion picture Jaws was released.

What is your reaction when you read this statistic? I find it very funny. But when you really think about it, it reveals something quite profound about human nature. Perhaps it was just a coincidence that more people visited the Grand Canyon that year, but perhaps it truly was a case of people wanting to get as far away from the beach as possible. So if we accept that the latter is true, then it tells us that human nature will change behavior even if the catalyst is a complete fabrication and void of fact.

We already know that humans are much more sensitive to pain than to pleasure, also when it comes to investments. We tend to make emotional decisions about our investments based on recent experiences and then we extrapolate short-term performance into infinity.

Over the last 21 years there were only 4 in which the JSE ended the year in the red: 1998, 2002, 2008, and 2018. The average long-term return for shares on the JSE is around 5% above inflation. So if you got 20% in a year, like we did in 2017, something had to give in future years to bring the return back to average.

So, we may have a negative return on the JSE in 2018 and even in 2019, but this too shall pass.

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