Investors urged to think long term
In the wake of Wall Street's slump and subsequent recovery on Monday, local fund managers urged investors to focus on the long term.
Investors are increasingly nervous having already seen their retirement savings contract due to weak equity markets over the past financial year.
“It would be remiss of us to worry about the short-term effects of volatility,” said Andrew Cain, director and portfolio manager of Dimensional Fund Advisers, which is based in the US. Similarly, Chris Kourtis, head of equities at Portfolio Partners, said it's “easy to get caught up in the day-to-day noise”. Investors shouldn't focus on this but on the horizon further ahead, he said.
Kerr Neilson of Platinum Asset Management claimed that “hyperactive hedge funds” are just a symptom of volatility, not the cause. He believes that the increasing use of derivatives is making the “whole system … more supple and flexible”, with greater uncertainty. The latest impact on the market is being blamed on reporting issues, he said, but that's not new. The underlying problem is that we are in a global situation of deflation and huge debt – and these two “don't mix well”.