Know Your Money with Bronwyn Waner and Craig Finch
Know Your Money with Bronwyn Waner and Craig Finch
173. Why Switching To Cash In A Crisis Often Costs You More
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Markets shout; money grows quietly. We sat down with Tamryn, Head of Retail at Allan Gray, to unpack why investor behaviour often drifts with the news cycle and how to build a plan that outlasts the noise. Using platform data, we explore how starting point bias shapes equity exposure for years: investors who began during strong local markets still hold more equities than those who started after a weak stretch. Even when age and other factors are normalised, the human bias of focusing on what has just happened can continue to keep portfolios off plan.
Then we revisit March 2020. Some investors switched from balanced funds to cash as fear spiked, felt vindicated for a few weeks, and then watched the rebound sprint away before the world felt safe. Getting back in late turned a “defensive” move into the worst outcome versus staying invested. The takeaway is confronting but freeing: action often feels right, yet inaction can be the smarter move when your strategy is sound. You cannot time the turn, but you can own your process.
We also talk age and worldviews. Many younger South Africans have only known a weak rand, local equity underperformance, and steady low inflation, which can harden into belief. Older investors have seen cycles turn, high inflation cool, and markets recover after crises from Black Monday to pandemic panic. The constant through all of it is compounding. A long-run illustration shows how a small, persistent edge plus time dwarfs the index, turning steady decisions into extraordinary outcomes. Start where you are, automate contributions, resist switching, and let time work.
Great performers have coaches; investors should too. A skilled adviser keeps you anchored to goals, rebalances behaviour, and helps you stay in the game when headlines try to push you off court. If this conversation helped reframe your strategy, share it with a friend, subscribe for more grounded money talk, and leave a review telling us the habit that helps you stay the course.
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www.growthfp.co.za
Hello everybody, welcome to Know Your Money. I'm Bron Man Weiner.
SPEAKER_02And I'm Craig Finch, and we are from Growth Financial Planning. We hope you enjoy our podcast. Hello everybody, Tamron. Well, welcome back. Thanks so much. Tamron, head of retail, Alan Gray. Bron, how are you doing?
SPEAKER_04Good, thank you.
Market Noise And Investor Behaviour
SPEAKER_02Good to have Tamron here. We touched on uh on client behaviour in the last episode and how things around the world or noise or newspapers or all the information we get every single day, and most of it's negative, I think. And then you can react on those negative reports and that. And how do you on the platform, the Alan Gray platform, do you know how clients behave and have behaved? And do you have long do you have clients that have come from you from the beginning from 1974? And are they still with Alan Gray?
SPEAKER_00And who haven't reacted.
SPEAKER_02Who haven't reacted to stayed the course?
Risk Appetite Changes With Cycles
SPEAKER_00Yeah. Interesting to know how those Yeah, so we have some some great examples of uh clients that have managed to stay the course and you know the the outperformance relative to the market has delivered uh you know incredible, incredible impacts of compounding. But maybe I'll answer your first question first, which is you know, we were in the previous episode we talked a f a little bit about some of the things that we're thinking about for 2026, and we spoke about, you know, last year was a pretty good year. We shouldn't maybe necessarily expect it to repeat itself. We said that we thought there was lots of geopolitical noise, and it's got to be, you know, you know, we sort of encourage people to try and resist the temptation to act, as you said, based on the noise. Uh and then the other sort of point we raised was that there've been some trends that have been going on for a long time, and sometimes we we tend to anchor what's just happened. And so if I if I was to try and extrapolate those and make it quite relevant, because that's what we were, you know, telling people about the year ahead, and say, Do do we see signs of uh of people um for example in a period in a period where markets returns have been good, you know, do people's attitude towards risk change? Uh because we we tell, I'm sure you tell your clients, you know, this is your plan, you know, your risk appetite shouldn't change, it should be based on your personal preferences and your financial plan. But the reality is what you see in practice is that people's risk perception changes based on what's just happened. And we have an example that we've run where, so as I um said in one of an earlier episode, our platform was started in 2005. And so what we've done is we've taken, you know, cohorts of investors who who invested on the platform, and we've said, okay, well, depending on when you start and you know the the environment that existed maybe just before you started, do you have a different uh uh equity allocation? And equity is normally a proxy for risk. Uh and we we take out things like age and we try and sort of put similar balance clients together, because those types of things can definitely influence risk. So we try and normalize for all the factors that we think should genuinely influence differences in risk appetite. And we actually find that people's asset allocations, asset allocation is different depending on when they first started to invest. So in 2005, if we go back, we know that the years running up to that was actually very good in terms of SA equity returns. The people who invested in that year today still have a higher equity allocation than people who invested five years later or 10 years later. And then similarly, people who invested in 2019. Now you can remember we were talking in the last episode about how good SA has been last year in terms of returns, but that's coming off a period of almost 10 to 15 years of poor returns. Yes. So in 2019, we'd been seeing sort of poor returns in SA for about five years. And then interestingly, the allocation to equities for 2019 investors is lower than 2005, and there's no other reason to explain it than the time in which they're in the world.
SPEAKER_02Yeah, and then what was happening at that time.
Age, Anchoring, And Worldviews
SPEAKER_00At that or just before, because I think that is because that's what you get anchored to is kind of what's just happened. Uh and as I say, we we try to normalize for for other characteristics that we think would influence risk. And you know, that's why, you know, we we're very grateful for the partnerships that we've built with independent financial advisors, because you, you know, we know that you're engaging with your clients to try and counteract that type of behavior.
SPEAKER_02Yeah, we definitely are.
Behaviour You Can Control
COVID Switch-To-Cash Case Study
SPEAKER_00Uh and then we think it's even more relevant when you think about age. Okay because we don't we we normalize for age in that example, but if we take on the platform 49% by number, so not by AUM, because typically older clients have more assets. 49% of clients on the platform are under the age of 49. Sure. Do you think that's a good one? But what's interesting is if you think about that, okay, if you are 38 today, and let's say you've been working for since you were 23, and that's been 15 years. Think of what your world view looks like. You know, you've only known a period where the RAN's been probably, you know, mid-double digits, so 15 to 17 or so. You've only known a period where SA equities have underperformed, you've only known a period where the US has been strong. So that's gonna be what you think is normal. Whereas if you are 20 years older, you're gonna have seen multiple different cycles. So if you if you take a you know, a year like last year and a couple of years before that was a bad year, and then you overlay that it kind of against your age, it just shows you that sometimes the factors that shouldn't influence how you position your portfolios tend to. So behavior is behavior is very important, very important, yeah. But it's um yeah, and that's what you control. You as an individual, you actually control a lot. It's yeah, it's uh uh and then the other thing I wanted to say on uh on behavior. So we have some examples of um the real benefit of just the power of time. So sticking to the plan. Yeah, and so there's one which we it was an actual client example in COVID. So remember what COVID was like, that March 2020, it was a terrible month. You know, essay assets probably went to the cheapest they've been since like the 1960s.
SPEAKER_01Incredible.
SPEAKER_00It it was dark and and it was you know it was so uncertain, and we we just didn't know how long it was going to take to walk out of it. And um, and the certain clients, cohorts of clients, actually switched out of the market. And I, given the uncertainty, given the Can we just explain that?
SPEAKER_04So they were basically in equity, so invested, and then they went to cash.
SPEAKER_00Well, in this particular client that I've got this example of, it was actually they were in the in a balanced fund. Okay. They were in the Allen Gray balance fund. And they took the decision in March to switch to cash.
SPEAKER_04Okay.
Compounding Over Decades
SPEAKER_00Now, what meant what that meant was for the first month, so so half of March and about April, they, you know, they were in cash and the markets carried on going down. So they missed that drawdown. So they're probably thinking it's you know, that's the that was the the uh you know uh a good response. But because it's so difficult to predict when things turn around, and actually the markets turned well before, you know, COVID w got under control. So the market started to turn a couple of months later. And for this individual, you can imagine now they've switched to cash, it the world still feels pretty uncertain, the market's now rallied past the point um, you know, that you were previously invested, and now you're thinking, okay, but now how do I get back in? When do I get back in? Because if I maybe it still feels pretty bad, maybe it'll go down again. Uh and you'd you'd already experienced that other loss. And so this individual waited until the end of the year, where you know, the markets just carried on running and then got back in. Uh uh, and actually what what would have happened, and and so if you look at the results of okay, had that person just been in cash the whole time, versus if they just stayed in the fund versus the actual switching, the switching was the the worst outcome of the three. Whereas the best outcome of the three was just staying invested. And yes, you experience that trauma, and we all know when we see our statement and we've lost money, it hurts. It hurts like almost physical pain. Uh and so you've just you've you you can't try and pretend that isn't how we feel. That is how we feel. But sometimes the best course of action is actually in action, which feels counterintuitive. It does. But it's to resist against leave it. Or you look depending on what part money you guys the question and you you then and then you know the why, and you say, Okay, I've I've got to remember the next time this happens, that actually the best course of action is likely just to sit.
SPEAKER_02That's right.
SPEAKER_00And then the converse of that is we we have an example of a client who invested with us right from the beginning.
SPEAKER_021974.
SPEAKER_001974. I think it was like September 74, and we've got a tract on our website of I suppose 100,000 Rand. And today that would be f just under 5 billion. Sure.
SPEAKER_02And the comparative with 100,000 grew to five billion and they stayed.
Start Small And Stay Invested
SPEAKER_00They just stayed in the incredible. And that's that's that's a hypothetical result that we showed. The actual investment was a bit higher and they had some kind of withdrawals and contributions. It was a uh if I recall, it was a pension fund. But uh just that power of compounding. And actually it's the problem with compounding is it's like um a little bit like you know, watching a tree grow. You you can't see it for long periods, you can't see the benefit for a long kind of period of time. And the real benefit happens in the you know the ten years before you need to access your money. What do they say? Like Warren Buffett, um, ninety-five percent of his wealth was generated in the last ten years, and that was just compounding.
SPEAKER_02Exactly.
SPEAKER_00Uh and in our example that we have on the in the website, which tracks this 100,000, if you just put it in the index, it would have been 251 million. So that's also, you know, we we you know, we say um we just you just want to be a little bit better. And if you are one percent better every day, like if I started, I've been wanting to pick up tennis again. So if I went to tennis lessons today and I did and I got one percent better at tennis every day, which is not gonna happen because I'm not gonna play tennis every day, but if I did, you know, I'd be something like 35 times better by the end of the year. So it's just the power of compounding small, you know, differences relative to, you know, where you started or relative to what else uh you could have done um that makes a real difference in 10, 20, 30 years' time.
SPEAKER_04And I think often people don't know where to start. Well, I don't know how much I should invest, but it's the starting that matters.
SPEAKER_02And staying.
Coaching, Advice, And Staying In The Game
SPEAKER_04And just leaving it there. It's either the debit order or the lump sum and then just forgetting about it because that is your 1% starting, and then it allows to grow.
SPEAKER_02So your example said that if that client, the one that started 1974, tracked the market, just followed the market, it would be 250. But because there was an active manager looking after the money that did a little bit better every year, it would be a good thing.
SPEAKER_00And some years a little bit worse, this one would be clear, some years definitely worse.
SPEAKER_02It made that's incredible. Yeah. I heard Tiger Woods the other day say as well, he said the little things that you do, you can do it for a long period of time. Yeah. Little, little, and you'll you won't see the difference. He said then suddenly it comes.
SPEAKER_00Yeah.
SPEAKER_02And it's a massive difference because you've just been consistently doing it every time. Like your tennis example as well.
SPEAKER_00Yeah, it's that that power of the um there's an article about it, they called it the power of one percent, the power of one percent uh improvements. And it can be applied to it can apply to sport, it can be applied to how you run your business. And it can be obviously applied to financial portfolios, just doing a little bit better.
SPEAKER_02Daily habits, all that's incredible, yeah.
SPEAKER_00People, I think, you know, whenever I chat to clients, there's always a sense of, okay, well, it's not in my control. But when when you look at these types of examples, you realize that your decision, like to start and not to disinvest and not to switch, all these things, you have an outsized impact on the overall, you know, kind of end-of-day results.
SPEAKER_02Because you've chosen Alan Gray as your partner, they're gonna do all the hard yards and understand.
SPEAKER_00You know, to save it.
SPEAKER_02Yeah, you've trusted them, let them do their job, and you you stay the course, and that's that's incredible.
SPEAKER_00And then you've not reacted when uh you you've sort of known what you were focusing on in the long term, and that's why that's why the power of advice is such a critical part in anyone's you know, financial journey. Because you you you want to sit down with someone and say, okay, what am I looking out? What am what's my long-term plan? And if you know what you're working towards, then you can kind of handle uh the volatility and the noise a little bit better in the short term. And I I think, as we said earlier, I think the um the noise is gonna carry on. We're gonna see some crazy headlines uh from Trump and then.
SPEAKER_02There was Black Monday and there's been so many different crises around the world. And the markets have always rebounded and done so well. I mean, I remember when inflation was 21% in South Africa. I mean, you can't rem you know, it doesn't sound possible now. Inflation's four or five percent.
SPEAKER_00Yeah. So and I know, and that's um to my point of like your age and that's your worldview.
SPEAKER_02Yes.
SPEAKER_00For someone who's 38, inflation's been largely under five.
SPEAKER_02Yeah, yeah.
SPEAKER_00You know, their whole working life.
SPEAKER_02Yeah.
SPEAKER_00Whereas you've seen periods where it's probably been three, ten, twenty. Yeah, yeah. So you know it can spike.
SPEAKER_02No, and quickly, but you stay invested, and that's important. Yeah.
Closing And Listener Resources
SPEAKER_04Yeah, and I think just to end off with your um saying the power of advice, it's any good, even um tennis player, they they are great themselves, but they have coaches and they have people around them to show them their blind spots to keep them on the course. And I think financial planning should be viewed the same way that you've got to do this with a partner, and it shouldn't be a journey you do alone because you need someone to back your tennis.
SPEAKER_02I think Rob Macdonald spoke about Kyrgios and how he's not on the tour anymore and he's battling with his own issues, and you've got Dokovich who's had a co well, and all the great players have had a coach throughout their career, and how that coach has kept them through the good and the bad times, kept them on the court, kept them in the game, and they're still around. Where Kyrgios is off the court again and now he's got his own. He's never wants a coach. Yeah, exactly. Yeah.
SPEAKER_04Awesome. Thank you so much, and thank you for having us.
SPEAKER_02No, we were not. No, thank you. Thank you. Thank you for listening. If you have enjoyed this podcast, would like to subscribe, please visit our website www.growthfp.co.za. The information we have provided in this podcast is our personal opinion. For more detailed information, please discuss your financial situation with a financial planner.