2020 investment review
With uncertainty prevailing and a challenging investor's outlook in 2021, we thought it apt to review the performance of investments in 2020.
In this analysis of all major asset classes, growth is indicated by comparing it to Namibia's current inflation of 2.2% and South Africa's, which stands at 3.1% annually. For this analysis, only growth above inflation is considered as real growth.
Money market investments are instruments that generate interest up to a maximum term of 12 months. At present, our Capricorn Unit Trust Funds offers growth of around 4% effective interest per year after costs and tax deductions while 12 months fixed deposits from banks are just under 4%. Over the past 12 months, the average growth was 6.3% which was almost 4% above the average inflation for 2020 in Namibia. Cash's performance was impressive, and it remains a good option even though the rates are much lower than a year before.
Bonds also had a good year as one would expect. As interest rates move lower, bond prices typically rise, and you could have earned around 8.6% last year in this asset class. Once again, bonds offered outstanding growth above inflation and the second-best asset class for 2020.
Listed property grew by almost 14% in December last year alone, but it was not enough to make up for the year's severe downturn. Property was down 34.5% for 2020 and all growth over the past seven years have been wiped out.
Local equities also made a commendable closing effort over the last quarter of 2020, growing by 10.7% and 5.5% in December alone. The asset class ended the year with only 2.6% growth, and here too, there has been no growth over the past three years.
The winner for 2020 was foreign equities in Namibia Dollar terms which grew by 19.7% for the year. This robust performance was partly on the back of a weaker South African Rand, but we saw excellent performance and growth in most exchanges globally.
Measured in their respective local currencies, only a few exchanges ended 2020 in the red. The FTSE100 in Britain was down 12%, followed by the Euro Stoxx, which was down 2.6%. On the plus side, the MSCI Index of China topped the list with 28.3% growth for the year whilst the S&P 500 in the United States and the Nikkei in Japan were both up by 18%. The Dax in Germany climbed 3.5% over 2020.
Then finally, commodities measured in US Dollar terms, copper was the winner for the year with 23.3% growth followed by gold with 21% growth. Oil was hit the hardest and fell by more than 50% over the year.
The lesson from 2020? The year has again shown us the value of maintaining a well-diversified portfolio and getting the right advice on your investments.
We wish all investors a rewarding year ahead.
Should you require the appropriate and prudent advice from experienced investment professionals, contact Capricorn Private Wealth.
