The conventional wisdom

For years investors have heard the same advice: “It is time in the market, not timing the market, that creates wealth.”

Generally, this is good advice. Markets rise and fall, and investors who panic and sell during downturns often lock in losses and miss the recovery.

But there is another question worth asking today: What if the market environment itself is no longer conventional?

These are not normal times

We are dealing with an extraordinary combination of geopolitical conflict, uncertainty around global trade, government debt, inflation and interest-rate pressures.

At the same time, parts of global equity markets have reached demanding valuations, with enormous amounts of capital concentrated in a relatively small number of major technology and AI-related companies.

South African investors cannot ignore our own economic challenges either. Economic growth remains under pressure, while consumers and businesses continue to deal with high living costs, infrastructure constraints and uncertainty flowing from events elsewhere in the world.

So perhaps simply saying “stay invested and don’t worry about it” deserves some scrutiny.

Selling isn’t necessarily panicking

There is an important difference between panic selling and deliberately reducing risk.

Nobody knows whether markets will fall next month, next year or continue climbing. Trying to predict the top of a market is notoriously difficult.

But investors don’t necessarily have to make an all-or-nothing decision.

Someone who has enjoyed substantial equity gains might decide to take some profits, rebalance the portfolio or temporarily increase exposure to cash, money-market instruments, bonds or other lower-risk assets.

That isn’t necessarily trying to predict a crash. It can simply be risk management.

Your time horizon changes everything

This discussion becomes particularly important when we consider an investor’s objectives.

A 35-year-old saving for retirement may have 30 years to recover from a major market correction.

A 65-year-old about to retire could be in a completely different position. Losing 25% or 30% shortly before beginning to draw an income can have serious long-term consequences.

The question therefore shouldn’t simply be: “Will the market crash?”

We don’t know.

The better question is: “Can I afford the consequences if it does?”

Are we being paid enough for the risk?

Perhaps this is where conventional investment wisdom needs to meet common sense.

Remaining invested for the long term remains an important principle. But principles should not prevent us from responding when risks, valuations or our personal circumstances change.

Reducing equity exposure doesn’t necessarily mean abandoning equities. It may mean protecting some of the wealth already created while keeping sufficient exposure should markets continue higher.

And holding some cash isn’t necessarily doing nothing. It provides liquidity—and potentially the opportunity to buy quality assets at more attractive prices if markets eventually correct.

So perhaps today’s most important investment question isn’t:

“Should I get out of the market?”

It is:

“Am I being adequately rewarded for the risk I am currently taking—and can I afford the consequences if I am wrong?”