Is the JSE a bad investment?

Warren Ingram

South Africa has been through such a turbulent time over the last decade. Corruption, terrible economic policies and stagnant investment markets have caused investors to lose confidence in the JSE. There is a strong drive from South Africans to globalise their portfolios as a very rational response to these events. All South Africans should have a portion of their money invested offshore, however the ideal international allocation will depend on your circumstances and objectives, not your level of despair. Before taking the leap to send every cent offshore, take time to understand how the JSE has performed relative to other Emerging Markets and the World as a whole. The comparison might surprise you and help you to make better decisions about your money.


The graph below shows the twenty-year performance of the JSE, (red line), measured in Dollars in comparison to the Emerging Markets (blue line), and the World (in black).

Table: Twenty-year growth of $100 invested in the JSE, Emerging Markets and World index

 July 2000July 2020
Emerging Markets$100$373

The compelling twenty-year performance of the JSE took place during some terrible times. Consider that the Rand collapsed, we had a ratings downgrade, economic recession, load shedding and severe unemployment. Not to mention the impact of Jacob Zuma and his friends, the Gupta’s.

Over the last decade, however, the picture is rather different.

Ten-year growth of $100 when invested in the JSE, Emerging Markets and World index

 July 2010July 2020
Emerging Markets$100$143

The last decade was not great for Dollar investors in the JSE. Before, we all decide that the last 10 years is a reliable predictor of the next 10 years, we should consider the Emerging Market Index performance. The JSE and the Emerging Markets moved in an almost identical pattern. This close relationship is an inconvenient fact for those who claim that the JSE is never going to recover. The last 10 years have been unfavourable for all Emerging Markets – the JSE is not a unique outlier. That means when the global conditions turn in favour of Emerging Markets again, it is likely to favour the JSE too.


My aim is not to convince you to keep all your money in the JSE, my aim is to help you understand why the JSE has done so poorly. The JSE is not only driven by the SA economy or by corruption and bad politics. If we understand the Emerging Market context to the JSE’s performance, we have a better chance of understanding if the tide will turn again. The graphs above also provide a great example of how diversification will benefit investors over long periods of time. It is impossible to predict when Emerging Markets will do well again. That means it is better to ensure that you consistently have money invested in Developed and Emerging markets. That will cause parts of your portfolio to do well when other parts are not performing, with the goal of getting consistent growth. The best investors in history aim for consistency over long periods of time and diversification is a great tool to achieve consistent performance.

In summary, you should have money overseas but don’t be tempted to send all your money overseas in one mad rush. There should be a performance benefit in retaining some money in SA as part of your overall portfolio.

Warren Ingram is a Director of Galileo Capital and hosts the HonestMoney Podcast.

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