Staying the Course: Why Equity Exposure is the Real Safety Net

In the first two articles of this series, we explored the role of equities in both the accumulation and decumulation phases of retirement. We challenged the instinct to de-risk too early and showed how equity exposure, while sometimes uncomfortable, is often the most rational path to long-term financial security. Now, we bring it all together with three powerful charts that completes our story.

1. Don’t Let Market Noise Drown Out the Signal

The past decade has been extremely noisy filled with unprecedented events and volatility. As a result, investors’ ‘gutfeel’ can easily let them believe that multi-asset income funds are the top performing and most suitable investment solution for retirement savings, both pre- and in retirement. But when we zoom out and examine rolling 5-year trends, a more reassuring picture emerges for growth assets. Just as we split the past 20 years into two contrasting decades

in the first article, the last 10 years can be divided into two very different halves: in the first five years, multi-asset income funds outperformed multi-asset high equity funds by 4% per annum on average; while in the most recent five, the tables turned, with multi-asset high equity funds outperforming multi-asset income funds by the same average margin.

The chart above also highlights the asymmetric return profile of multi-asset high equity funds. Thanks to their built-in flexibility - combining equity with income assets and in most cases actively managed asset allocation - these funds have delivered a 71% hit rate of outperforming multi-asset income funds, with an average annualised alpha of 2.3%. The best 5-year outcome saw a 13% annualised outperformance, while the worst lagged multi-asset income by just 6% per annum. In other words, the upside of taking on the additional risk for aditional growth potential, has historically far outweighed the downside.

2. Beating Inflation Matters

Maintaining and growing your purchasing power is essential to building long-term wealth, especially when saving for retirement or already drawing an income (that needs to increase by inflation annually) from your savings. Inflation may seem modest year to year, but its compounding effect quietly erodes what your money can buy over time. That’s why it’s not enough for your retirement savings to merely keep pace with inflation, it needs to exceed inflation. Equities, particularly through multi-asset high equity funds, have historically delivered this outperformance.

The chart above illustrates a few key insights:

• Something that cost R100 in 2003 now costs R303 - more than triple, highlighting the silent but powerful impact of inflation;
• Income funds may offer a smoother ride, but they simply lack the growth potential needed to consistently outpace inflation and grow wealth in real terms;
• As equity exposure increases, from low equity to full equity, the journey becomes more volatile, but so does the potential to meaningfully exceed inflation.

This becomes even more important once you begin drawing an income from your retirement savings. Without sufficient growth, your capital may struggle to keep up with rising living costs, potentially shortening the lifespan of your portfolio. Equity exposure, even in retirement, remains a vital lever - not just for growth, but for preserving purchasing power and sustaining income over the long term.

3. Stretching Your Perspective

The final chart challenges our perception of what “long-term” really means. Consider this: a 40-year-old investor is likely to retire around age 63, giving their retirement savings an investment horizon of over 20 years. But retirement isn’t the end of the journey - it’s the start of another long phase, often 25 years or more. That means this investor’s total investment horizon could stretch beyond 45 years. So, here’s the challenge: 10 years isn’t long-term.

Even 15 years may not be. Twenty years, and beyond, is where the real compounding happens.

The rolling 20-year return data tells a compelling story. Multi-asset high equity funds have delivered a 100% success rate in outperforming multi-asset income funds over these periods. But the real insight lies in the scale of that outperformance. With only 40% equity exposure - typical of multi-asset low equity funds - you might earn just 0.5% per annum more than multi-asset income funds. That’s barely enough to move the needle over decades. It’s only

when equity exposure increases to around 75% - as in the multi-asset high equity funds - that the growth becomes meaningful, with an average outperformance of around 2% per annum.

In other words, time alone isn’t enough. To truly grow your purchasing power and build wealth in real terms, you need both time and sufficient exposure to growth assets.

Invest with Confidence, Not Caution

Retirement investing is not about reacting to short-term noise, it’s about staying committed to a long-term strategy that works. The data is clear: equity exposure, when paired with time and discipline, has consistently delivered better outcomes for investors, both before and after retirement. Whether you’re building your nest egg or drawing from it, the principles remain the same. Stay invested. Stay growth-oriented. And above all, stay focused on the long game - because that’s where real financial security is built.