More and More Investors are Attracted to Liquid Options

Time to Cash In?

An article published by South African Insurance Times and Investment News poses the question: change to cash, or not? This comes in response to the current volatility and uncertainty surrounding the equity and bond markets, where cash is becoming an increasingly attractive option for concerned investors.

Joint MD of Taquanta Asset Managers and asset manager of the NedGroup Money Market Unit Trust, Stephen Rogers is of the opinion that cash should not be seen as an ‘all or nothing’ alternative. Taquanta Asset Managers is regularly ranked as South Africa’s top cash manager in a range of independent market surveys.

Rogers said, “It’s probably too late to switch from equities to cash right now. But it is time to re-weight one’s investment portfolio and to include a higher proportion of cash than before, although it may not be advisable to move all one’s equity and bond investments into cash”.

Rogers went on to say that, “If one is fortunate enough to come into new money – for example, from the sale of one’s property, an inheritance or even winning the lotto – then cash is probably the best place to put it right now, at least until some level of normality returns to the equity, bond and property markets”.

He dismisses the argument that equities remain a better investment option than cash due to rising inflation, the tax drag and self-discipline risks associated with having ‘liquid’ cash investments, such as money market funds. Rogers points out that very few investment opportunities can guarantee returns over 12% in the current climate, which is at least a positive return considering the present rate of inflation.

Rogers asked, “What else is beating inflation or is likely to beat inflation in the foreseeable future?” He added that equity unit trusts are just as susceptible to tax and self-discipline risks as money market funds. “The point is that while equities may have been able to deliver returns of above 30% in the past, negative returns are becoming something of a norm in the current volatile market,” Rogers said.

According to Rogers, there are highly divergent views on where the resources and financial counters are going, or even whether these still offer value. The pure equity fund managers who promise a positive return overcoming inflation in today’s market is likely stretching the truth, he believes. “Equity trading volumes are significantly down in the institutional space – the institutions are not going there – and that should serve as a guide to private investors,” Rogers urged.

The information in this article is courtesy of Marilyn de Villiers (“Change to cash – or not?” ITINews, 12 August 2008).

Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.