With the Middle East conflict rattling global markets, Consult by Momentum CEO Johan Minnie explains why staying calm, staying invested and diversifying smartly is still your best strategy right now

You probably got a fright when you opened your investment portfolio the last few weeks. We all did.

Global volatility always wreaks havoc on carefully laid plans, but a kneejerk reaction is the very last thing your money needs right now. Even if the numbers look scary and your instinct tells you to stem the bleeding, sometimes the best action is no action: stay the course and let the market correct itself – like we’ve seen it do, time after time.

The turbulence we’re seeing right now is linked to the ongoing conflict in the Middle East. When the hostilities began, many assumed it would be over soon and the markets would stabilise. Fast forward to several months later and there is still no clear resolution in sight. And that uncertainty is now filtering through global markets: oil prices have come under pressure, inflation risks have re-entered the conversation, and investors are increasingly uncertain about where interest rates may go next. That combination tends to drive volatility fast.

But remember: volatility is not the same as loss. And understanding that difference is the first step to making good decisions right now.

What is actually happening to your money

When your portfolio drops in value, it can feel as if your money has vanished into thin air. It hasn’t. If you had, say, 100 units last week, you still have 100 units today. What’s shifted is the market value attached to them in that moment. It’s an important distinction worth remembering, because the moment you sell those units at a lower value, the paper loss becomes a real one.

Investors who stay the course know this dance well, because we’ve seen it before. Remember 2008? When the American subprime mortgage crisis hit the global market, banks collapsed, stock markets fell sharply, and many investors panic-sold at rock-bottom prices. Those who held on recovered and, in many cases, came out ahead. The same pattern repeated in 2020 when Covid-19 turned the world upside down. It was one of the fastest market crashes in history – and one of the sharpest recoveries. We can go back even further: Markets absorbed PW Botha’s 1985 Rubicon speech, even though it collapsed the rand. We also survived the Asian financial crisis in 1997-1998 and the dot-com crash in 2000-2002.

In short, history has shown us that the markets have recovered from every major geopolitical and economic shock eventually – though the path there is rarely smooth – and they’ll likely do so again.

Don’t sell. Diversify

The answer is not panic selling; it’s diversifying. A well-diversified portfolio is your best defense against market turbulence. If you have a balanced portfolio that spreads your money across equities, bonds and cash, and is managed by a professional so you don’t have to stress-watch the markets, you’ll be much better positioned to ride out any storms. You can also diversify across local and offshore markets while selectively incorporating alternative assets such as gold and precious metals, which investors have increasingly gravitated toward during periods of geopolitical uncertainty. If you want to go further, AI and tech stocks have recently attracted significant investor interest, and for good reason.

Ironically, periods of global instability can also create opportunity in emerging markets. While investors often retreat from these markets first during times of uncertainty, countries with credible financial systems, strong monetary governance and resilient institutions can start looking increasingly attractive relative to conflict-affected regions.

South Africa, despite its challenges, still has a respected Reserve Bank, a sophisticated banking sector and a well-regulated financial system – factors many global investors continue to value. And while global uncertainty usually sees investors fleeing emerging markets first, South Africa’s physical and geopolitical distance from the current conflict can suddenly make it appear more stable than many other developed markets.

For investors looking to diversify beyond developed markets, that combination is worth taking seriously.

What to do right now

Before making any sudden changes, speak to your financial adviser and properly understand your exposure. Let them remind you of your goals and stay focused on them. Unless your personal circumstances have changed radically, there is rarely a good reason to abandon a long-term strategy because of geopolitics. One of the biggest mistakes investors make during periods of volatility is allowing emotion to override long-term planning. Fear tends to push people into making short-term decisions at exactly the wrong time.

Next, look at your budget. Fuel prices are rising, which will impact the cost of goods and services. Where can you cut unnecessary spending? Can you redirect that money into your savings? If you are investing monthly, you are actually buying units at lower prices right now – and when the market recovers, those units will be worth more. Consistent, regular saving will help assuage your nerves while also in itself being a form of diversification.

The investors who usually suffer the most during periods of volatility are not always the ones exposed to the greatest market risk. They’re often the ones who make emotional decisions in response to uncertainty.

Those who come out ahead in times like these are the ones who stayed calm and stayed put when everyone else was running for the exit. That’s always been the best strategy and right now is no different.

Markets move in cycles. Geopolitical shocks come and go. But disciplined investing, sensible diversification and a long-term view remain remarkably consistent drivers of wealth creation.