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Fishing in Stormy Seas

29 September 2020

It's generally agreed amongst seasoned fishermen that fishing immediately before a storm is the most lucrative time to be on the water, and the converse is often true too (not always, but often) that fishing directly after a storm produces a lower yield.

Investing is similar (although the storms are much harder to predict!) – those who make their moves before a storm in the markets, and then sit tight, have proven to have better returns. Those who make big changes directly after the storm have a harder time making their money back.

To successfully fish in a storm front, you have to understand what is taking place in the atmosphere. Fish can feel the changes in barometric pressure, which causes them to frantically look for food so that they can survive the tempest. During this fish frenzy, the fisherman sits calmly atop the water, keeping an eye on the storm and methodically pulling up his catch.

When it comes to investing you want to be like the fisherman, not the fish. Many people react frantically and emotionally to stormy investment news, instead we should maintain a calm and methodical approach.

It is impossible to predict the optimal time to buy and sell investments. However, if given a choice, try to get on the water before a storm moves in and avoid fishing as one moves out. Research shows that the best strategy is not trying to time the market, but spending time in the market with a well-developed investment plan. After all, the best fisherman would be the one with the most experience on the water.

Fishing, much like investing, requires patience. You need to allow time for ideas to play out, you’ve taken a position and now you wait. If you are pulling up your line every two minutes to check for a bite then you aren’t going to catch anything, you’ve got to let it sit.

It is important to remember that while investing and fishing can both look like there isn’t much going on, there are movements below the surface. Doing nothing is not the same as waiting patiently for your time to strike.

The longer you stay invested, the greater your chances of generating positive returns in your portfolio. When it comes to investing for long-term goals, time is on your side.

Sanlam Life Insurance is a licensed financial service provider.
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