you might have woken up this morning seeing a whole lot of red in your portfolio
what is the reason what is causing it and most importantly what do you do about it
today we're going to answer all those questions and show you six
share purchases that we made today because of it so stay tuned and let's get started
all right let's break this down and let's make this as simple as possible this is casual
cash after all where we discuss and go through financial matters like you're chatting to a friend
over lunch first thing is first you may have seen that the markets are tumbling this morning
you may have even gone online to see if you could find out why let's go through what's happening in
the world my personal view on it and in my own experience what i'm doing to make the most of
it okay if you've been on this channel before we have been speaking this year about the unique set
of financial conditions we find ourselves in so why are the markets so red well here's the reason
it's a combination of economic factors both locally and abroad almost every country this year
is experiencing extremely high inflation during covert interest rates were brought down to record
lows to encourage consumers to spend money and keep the economy going well it worked and people
took advantage to buy cars homes luxury items and we found ourselves in a unique situation you see
because interest rates were so low everyone wanted to spend their money on high credit items so the
demand for everything was heightened but at the same time there were shipping delays and shortages
caused by coven and lockdowns so supply was restricted higher demand and lower supply almost
always means higher prices for everything that was the first step of inflation the second step came
about when russia invaded ukraine in february to put a complex economic situation simply
russia is a huge global supply of oil and gas when countries decided not to import the oil in support
of ukraine the supply went down and the price of oil and other commodities went up now when
the oil price goes up everything goes up all the way down to groceries and bread and milk because
companies use oil and gas to produce and transport their goods so here we have a situation where
interest rates were low demand was high supply was constrained and now we have over inflated energy
prices this is what you would call hyperinflation now the best way to combat this is for the reserve
bank to start raising interest rates back up again so the usa and south africa and most countries
have begun raising interest rates and for big companies it means their expenses go up because
most of them have huge loans that they now have to pay more money on so that in turn is typically
negative to the market okay i hope you're still with me so far because that leads up to today
where we got a double whammy the american reserve bank raised interest rates by half a percent and
on top of that china announced they were doubling down on their lockdown restrictions after a surge
in covet infections now why do these two things affect south africa simply put when the world's
biggest economy sneeze the rest of the world catches a cold strange us and chinese economies
affect south african trade so our markets often follow their lead then just to put the cherry
on top as you and i know south africa has been implementing more load shedding in the last few
months meaning higher costs for businesses and everyday people and less profits all around so
over the last few months and especially the last few days markets have not been happy
and there you have it why the market is going down in a neat little box but that brings us to
our next question as investors what do we do about it i can only speak from my own experience and the
things i've learned over the years and that is that when markets do well typically individual
growth stocks do well and when markets are turbulent the index tracking funds or etfs
tend to offer more safety but simply put certain etfs and index tracking funds more often than not
will have steady growth over the long term all you have to do is zoom out on the grass
for the jsu top 40 or the ftse 100 or the s p 500 there are typically always dips and then
recoveries the best way to normalize your risk is to dollar cost average that basically means buying
into index funds consistently no matter what the market is doing here's an example for you
right here the first person has terrible timing and invests in the s p 500 only at the top of
the market right before all of the major crashes the second person has perfect timing and invests
only at the bottom of all market crashes and the third invests regardless of the market with the
same amount every single month as you can see in a real world scenario all of them make money but the
person who invests in the market regardless makes the most profits no matter the timing
so the point that i come to is that market conditions come and go right now inflation is high
and interest rates are low in time interest rates will have risen and inflation will lower and one
way or another the energy demands will level out with supply what we do have now is an opportunity
as always to buy into the markets keep in mind it might go down more which means we can keep buying
in and get it at a lower price but consistent investing should provide good results over
the long term and selling in downwards markets doesn't tend to typically give the best results
it was nathan ross child who said great fortunes are made when the cannonballs are falling in the
harbor not when the violins are playing in the ballroom so with that we're going to finish off
with the trades i made today keep in mind it's not easy to time the market and it may go down further
but i figured it was a good time in general to top up my investments and i bought additional shares
so 500 rand in the citrix property etf 500 rand and four banks because often south african rate
uh south africa raises interest rates after the major powers due so that's 500 rand at first bank
and standard bank net bank and capitec each i'm not too fond of absurd and lastly i topped up 2
000 rand in my s p 500 growth fund that i have in united states dollars on easy equities like i said
these aren't timed investments but just a good time in general i think to top up in my existing
investments for the long term and there you have it the reason for the markets downward slide
why it's happening and my personal thoughts as an investor about how to invest in these
kind of markets for the long term and that's it for today's episode i hope you enjoyed it
and please feel free to give the video a like if you found the information helpful and subscribe to
the channel if you haven't already but until then i'll see you guys next time on casual cash cheers