Staying Calm in a Market Downturn

Corona Financial Services is celebrating 40 years of investment experience this year. Over those four decades, we’ve guided clients through many market cycles including sharp downturns, prolonged recoveries, and strong growth phases. One consistent lesson remains true: investors who stay calm and avoid reactive decisions are often the ones who benefit the most in the long run.

Market declines can be unsettling, but they are not unusual. In fact, they are a normal part of the investment journey.

What the JSE Has Taught Us

Let’s look at the performance of the JSE All Share Index (ALSI), a broad measure of South African listed companies:

• In 2008, during the global financial crisis, the ALSI fell by around 23%. But by 2010, it had fully recovered and went on to deliver strong returns for several years.

• During 2020, when COVID-19 triggered a global selloff, the ALSI dropped over 30% from January to March. Investors who stayed invested saw the market recover by the end of the year, closing 2020 with a positive return.

• Over the 20-year period from 2003 to 2023, despite periods of political uncertainty, global recessions, load-shedding, and other challenges, the JSE ALSI delivered an average annual return of around 11%, including dividends.

  
  

Chart 1: JSE ALSI Total Return – 2003 to 2023

This chart shows the growth of R100,000 invested in the ALSI in 2003, growing steadily to illustrate long-term performance despite dips along the way.

Data based on historical performance of the FTSE/JSE All Share Index. Annual average return of approximately 11% includes dividends, based on estimates from published long-term return studies and performance summaries rom the JSE and various South African asset managers.

Missing the Best Days in the Market Can Be Costly

Investors who try to time the market selling during downturns and re-entering when conditions feel safer often miss the sharp rebounds that follow. Many of the JSE’s best performing days have occurred within weeks of the worst ones. Sitting on the sidelines during these periods can significantly reduce long-term returns.

Chart 2: Impact of Missing the Best 10 Days on the JSE (2003–2023)

Shows the difference in return between:

• Staying fully invested

• Missing the 10 best days

• Missing the 20 best days

Figures are illustrative and adapted from international research (e.g., JP Morgan Asset Management’s “Guide to the Markets”) and aligned with local market behavior. Calculations assume a consistent 11% annual return, with performance impact estimates based on the tendency for the best days to occur close to the worst.

This clearly demonstrates the value of remaining invested.

Focus on the Bigger Picture

Your investment strategy is built with your personal goals, time horizon, and tolerance for risk in mind. Temporary declines are part of the process, and our role is to help you stay focused on the bigger picture rather than reacting to short-term noise.

At Corona, we’ve been through enough cycles to know that patience and perspective are key. If you have questions about your portfolio or current market conditions, we’re always here to help.

Regards

PW Coetzer

Corona Financial Services

Disclaimer: This article is for informational purposes only and should not be considered financial advice. For personalised investment advice tailored to your specific financial situation, please contact us or one of our qualified financial advisers at Corona Financial Services.