Anyone with an interest in their natural surroundings will be well acquainted with the conical holes made by certain species of antlion larvae in soft, sandy soil. The little creatures corkscrew into the soil, flicking out the sand with their mandibles until they have formed a smooth-sided, cone-shaped hole. Any small walking insect entering the hole is shot at with grains of sand to keep it sliding towards the bottom of the hole where it is grabbed by the antlion larva.
The prey is then pulled underground to have its juices sucked out through sharp, hypodermic pincers. Many of us currently feel like that poor insect prey! The rand is back to around R17/$ and the equity markets back to negative for the year, except for the technology stocks and a few others.
We have to get used to the fact that there will always be something bad and something good happening simultaneously to influence the performance of the shares in your portfolio. However, it is a fact that the good triumphs over the bad in the long run. Human beings are hot-wired to be active. We want to do stuff, and doing nothing feels like a waste of time. When it comes to investments, however, we generate at best a neutral outcome when we tinker too much with a well thought-out investment plan. That is why it is so difficult for active fund managers who buy and sell the shares in their portfolios regularly with a view to the best possible results, to outperform passive index trackers.
It is, however, important to spend a lot of time re-evaluating the circumstances that were taken into account when you first sat down to formulate your investment plan. Things change constantly in our lives and in the markets. Just like we grow older and the risk profile of our portfolios change, so do the markets. Just over the last few months we have seen a structural change in the way people use technology for work purposes; a big move towards renewable energy; and more interest in biotechnology. So the question remains when we should act and when not. Let us use a sea analogy and say we believe you should act based on the tides and ignore the waves.