2020 was a tough year, and many people struggled financially, emotionally, and socially. In that climate, did the stock market add to our woes? Have our investments grown or shrunk? How do they compare with inflation?

 

We looked at our balanced and equity model portfolios to try and answer the question “are my returns good, bad, or ugly?”

 

1 year 3 years annualised 5 years annualised 10 years annualised
Ascent Balanced model 7.7% 4.8% 5.5% 9.6%
Average balanced fund 5.1% 3.5% 4.4% 8.0%
Inflation 3.3% 4.0% 4.7% 5.2%

*As at 31 Dec 2020

 

 

In balanced funds, we aim to beat inflation by 5% per year, and the extremely tough last 5 years when the market was flat and the economy struggled to deal with, and recover from, the Zuma years, has meant we have not reached that goal. Interestingly, last year produced returns of 4.4% above inflation, in spite of all we went through globally. Equities were the main driver in these returns as they typically make up 60%-70% of a balanced fund. What do the numbers look like in our equity model portfolio?

 

1 year 3 years annualised 5 years annualised 10 years annualised
Ascent Equity model 8.0% 3.6% 6.4% 9.9%
Average equity fund 2.1% 0.2% 3.4% 7.2%
JSE All Share Index 4.1% -0.1% 3.2% 6.3%

*As at 31 Dec 2020

 

 

The previous 5 years have also weighed heavily on the equity funds where you would expect to earn around 7% above inflation. We are pleased however that our choice of funds has surpassed the average fund by 2% to 4% per year after fees.

 

We were advising an increase in offshore exposure last year for many clients where we felt they could take on the additional risk of a fluctuating exchange rate.

 

1 year 3 years annualised 5 years annualised 10 years annualised
Ascent Global Equity model (US $) 16.2% 8.3% 11.4% 9.8%
Ascent Global Equity model (Rands) 20.4% 14.0% 9.3% 17.6%
MSCI World Share index (US $) 15.9% 10.5% 12.2% 9.9%
Dollar/Rand % change -4.7% -5.8% +0.9% 8.3%

*As at 31 Dec 2020

 

 

Offshore markets have performed substantially better than our local market, and if one looks at the returns in Rands there is also the Rand effect to consider. It is important to note however that the Rand strengthened against the US$ over the past 5 years, so it is not a one way bet as we often believe.

 

So it seems 2020 was a reasonable year for returns, in spite of COVID. Much of this is because of the massive fiscal and monetary stimulus that has been pumped into economies to keep them afloat and now the exuberance around the vaccines. What is in store for us in 2021?