The Johannesburg Stock Exchange (JSE) experienced significant volatility in September, with the market falling 6.7% and wiping out over R1.6-trillion in value. This decline has led many investors to reassess their portfolios and seek advice from financial advisors. However, experts argue that a well-diversified portfolio, aligned with an individual's financial goals, can help mitigate the impact of market fluctuations.
Upon closer inspection, it becomes clear that the market decline was largely driven by a narrow group of shares. Mining companies, particularly those involved in gold and platinum, were heavily affected by the drop in metal prices. Additionally, Naspers and Prosus, two local giants with significant holdings in Chinese technology company Tencent, contributed to the decline. These two groups of shares accounted for approximately two-thirds of the monthly decline.
Interestingly, the same shares that fell in September had experienced significant gains in the previous month. In August, the JSE was one of the best-performing major stock markets globally, with gold mining shares rising 38% before falling 15% in September. This highlights the importance of being aware of market trends and making informed investment decisions.
According to Matthew Marrian, director at InvestSense, three types of investors were particularly affected by the market volatility in September. The first group consists of investors who have a larger holding in one part of the market than they realize, often due to the growth of their investments over several years. The second group includes investors who are carrying more risk than their circumstances can absorb, often as a result of following recent market trends.
The third group, and potentially the most vulnerable, consists of retirees whose portfolios were not designed to generate income during periods of market volatility. When a portfolio is not diversified, and investments decline in value, the income must be drawn from holdings that have lost value, resulting in permanent losses. A well-structured portfolio, on the other hand, can help ensure a steady income stream.
When considering the full year, the impact of the September market decline becomes less significant. The JSE has fallen approximately 7% over the first nine months, having risen 39% in 2025. The market currently sits about 17% below its March high. These fluctuations underscore the importance of having a clear investment strategy and risk management plan in place.
Ultimately, a well-structured portfolio can help investors navigate market volatility and ensure that their investments align with their financial goals. While market fluctuations can be unsettling, a diversified portfolio can help mitigate losses and provide a steady income stream. As Marrian notes, good planning can help determine whether a market decline is something that happens to a portfolio or something that happens to an individual.
Key points
- A well-diversified portfolio can help mitigate the impact of market fluctuations.
- Investors should be aware of their risk exposure and adjust their portfolios accordingly.
- A portfolio designed to generate income during periods of market volatility can help ensure a steady income stream.
