Part 3 of the Buy The Dip series reminds us that, like any investment strategy, buying the dip isn’t risk-free. Experts explain that while global markets jump around with every headline, Botswana’s tend to move at a calmer pace. But Bifm cautions that whether markets move fast or slow, investors do better when they look at long-term value instead of reacting to day-to-day noise. As Bifm CIO Ms Bhina Botlhe-Tshukudu noted earlier in the series, businesses eventually adapt, and market trends come and go.
Investment professionals at the Botswana Insurance Holdings Limited (Bifm) have cautioned investors against making hasty decisions based on short-term market shocks, saying such reactions can derail long-term goals and cost investors potential returns.
In a recent webinar, they explained that markets constantly absorb and react to new information, even surprises, which quickly get reflected in share prices. Global markets, in particular, tend to anticipate developments based on data and news, often responding ahead of time to what investors expect will unfold.
Disinvesting when one meets a personal goal is ok, but trying to game the market’s every move?
“You are actually missing out on certain opportunities that could give you more value in the long term,”
Ms Bhina Botlhe-Tshukudu, Bifm CIO, said during a recent webinar.
This year, one of the biggest global themes has been geopolitical tension, especially linked to the United States’ protectionist stance under President Mr Donald Trump. Markets briefly sold off after Mr Trump made comments about certain countries he wants to target, but later recovered.
“So in effect, it does mean that the market has already priced in this particular risk,”
said Ms Botlhe-Tshukudu.
“There will be times when information comes out and it’s negative, and the market reflects that, particularly offshore.”
Botswana is Calmer
Locally, Botswana’s market behaves somewhat differently. The country’s capital markets tend to react more slowly to new information, a reflection of the limited number of investment options available. Historically, there has been a lot of money chasing too few assets.
“In that instance, when new data comes in and it’s negative, investors are often cautious about selling because they want to protect the value they already have,”
said Mr Mbaku Mudlovu, Bifm’s Portfolio Manager – Fixed Income.
“But on the other hand, they also worry that if they sell, there may not be many attractive assets left to buy.”
Don’t Time The Market
Asked about timing the market, Ms Botlhe-Tshukudu said long-term investors who stay invested through market ups and downs often perform better than those who try to anticipate every price swing. She noted that attempting to sell before prices fall and buy just before they recover is nearly impossible to get right consistently.
“You need to be able to predict with certainty when the market is going to go down so that you exit right before that happens. But you also need to be able to predict when it’s going to take back up so that you enter right before,” she said, adding that “It’s a very difficult thing to do because we can’t predict the direction of the market any given day.”
Long-term Investing
Against this background, she advised that investing should always be viewed as a long-term commitment.
“When you invest, you are not investing for today to then get the benefit tomorrow,”
she said.
Long-term investors, by contrast, tend to fare much better by simply holding their investments through the inevitable ups and downs.
“From that perspective,” Ms Botlhe-Tshukudu continues, “we tend to believe that if you’re able to withstand the ebbs and flows, you will generally be better off than trying to exit a product at maybe what you think is an opportune time, because you’re trying to predict assets, but it may turn around tomorrow while you’re still disinvesting.”
“If you are holding, you will experience the downturn,” she said, adding that “but all of your investments will also experience some of the upturns”.
“Generally, investors who hold through these periods tend to do better than those who try and time the market. It’s simply because if you miss the cues, if you exit too early, you’ve already lost some, and if you enter too late, you’ve missed some of the upside.”
What separates successful long-term investors from the gamblers?
Seasoned investors dig into the businesses they’re backing. They study companies, bonds, and equities to understand how they will perform across market cycles.
Read: Backing Good Companies with Investors Smarter Than You
“The ultimate goal is to identify how this business or these issuers will perform through any market cycle,” said
Ms. Botlhe-Tshukudu.
“To say, when there is a downturn, do they believe this business will survive enough to pay interest on its bonds or dividends if it’s an equity?”
This approach effectively prices in the market’s natural ebbs and flows.
