OPINION: Investing through the global chaos

JOHANNESBURG – Geopolitical issues, a global trade war, local political uncertainty and a struggling economy have made it difficult for investors to navigate investment markets.

It seems chaos is the new norm, and South African consumers are struggling to balance their budgets as inflation rises, food prices are increasing, the petrol price is at a record high and household debt levels remain elevated.

When there is “doom and gloom” all around, what should investors do when things around them seem to be in chaos?

Proceed to Source : IOL

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Have balanced funds changed investor behaviour?

South African investors have had to deal with very muted returns for the better part of the last five years. Between July 1, 2013 and June 30 2018, the average return from unit trusts in the South Africa multi-asset high income category was just 8.2%.

This was a mere 2.8% ahead of inflation for this period. Given that these balanced funds would ordinarily be expected to produce returns of at least CPI + 5% over a five-year period, this is obviously disappointing.

What is notable, however, is that despite this situation investors have continued to favour these strategies. The latest statistics from the Association for Savings and Investment South Africa (Asisa) show that multi-asset high income funds continue to be the main savings vehicle for most people invested in local unit trusts.

At the end of June this year, the assets of funds in this category increased to above 25% of all assets in South African collective investment schemes for the first time. As the table below shows, it is the only major fund category to have shown consistent growth in both terms of assets and as a percentage of the total over the last five years.

 

Proceed to Source : MoneyWeb

Private equity managers invest a record R31bn

Political turmoil did not deter Southern Africa’s private equity managers in 2017, which invested a record R31.1bn, according to a survey published this week.

That compared with an annual average of R14.7bn over the preceding 10 years, the Southern Africa Venture Capital and Private Equity Association’s (Savca’s) annual private equity survey finds.

New investments, as opposed to follow-on investments, accounted for 60% of the total, or R18.9bn. This was surpassed only once in 16 years, by a record R24.7bn in 2007. The retail, services and real estate sectors claimed more than 50% of investments made in 2017.

Proceed to Source : Business Day

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Acorns co-founder Walter Cruttenden launches savings app Blast

Walter Cruttenden, co-founder of one of the most disruptive fintechs in the investment space, Acorns, launched a new savings app Tuesday called Blast.

Like Acorns, which has 3.7 million investment accounts in the U.S. and is adding 200,000 customers a month, Blast lets people save money without having to think about it or make a conscious effort.

Proceed to Source : American Banker

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How many South Africans still think Bitcoin is a bad idea – and those that wish they had invested

Old Mutual has released its 2018 Savings & Investment Monitor, focusing on the finance habits of every day South Africans.

The report is based on more than 1,000 face to face interviews, from 26 April – 26 May 2018, which were weighted to be representative of the South African working metro population.

Proceed to Source : BusinessTech

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Join digital stokvel for smart, new investing

If you’re looking for a simple and cheap investment, there’s a new offering on the market that is accessible to anyone with a smartphone.

Franc, which is being billed a “digital stokvel”, gives its members access to a money market fund and an exchange traded fund (ETF) via an app.

A money market fund is a unit trust fund that targets returns higher than savings in a bank account, while the ETF is a passively managed fund that tracks a basket of shares or bonds or an index.

Proceed to Source : Sowetan Live

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How to make time work for you when you’re ready to invest

Understanding your time horizon will help you get the most of your long- and short-term investment

The longer you can avoid dipping into your savings, the greater your range of investment choice. When markets are volatile, as they have been in recent years, you need to be realistic about the time horizon of your investments to get the most from them.

Knowing how the time frame of different types of investments affects savings outcomes can help investors choose the most appropriate investment vehicle to earn the best possible growth.

The savings levels of working South Africans are low at just 15% of their income. But according to the Old Mutual Savings Survey, savings for the entire population are even lower at just 3%, reflecting the country’s overall low savings rate.

Investors often choose bank fixed-deposit accounts and money-market funds, as both benefit from set interest rates and provide fairly easy access to savings.

Average 12-month interest rates for fixed-deposit accounts from SA’s four biggest banks are currently about 5.5% to 7.5%. Average money-market rates are about 7% to 8%. With money-market funds, investors can access their money within 24 hours, which is a significant benefit.

By choosing to move up the yield curve, which means investing in fixed-income funds, investors can get average returns of between 7% and 9%, immediately adding almost 2.5% extra in returns while remaining in a low-risk investment. Although these funds should be retained for at least 12 months, investors still have access to their funds within 48 hours.

Proceed to Source : BusinessLive

Millennials ‘not investing in pension funds’

Less than half of millennials are saving for retirement through pension or provident funds, with shifting perceptions by younger investors offering both opportunities and difficulties for financial services companies, according to research conducted by Old Mutual Unit Trusts.

Old Mutual’s survey suggests millennials are saving but not investing, reflecting a trend analysts say is putting increasing pressure on the fees that asset managers are able to charge.

It may also prompt consolidation within the financial services sector.

Proceed to Source : Business Day

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Fees can reduce retirement savings

I recently came across a concept called optimism bias. Ever heard of it? It’s also referred to as the “illusion of invulnerability”. Simply put, it’s the idea that bad things happen to other people, not to you.

It’s a coping mechanism employed by our brains, and I suspect it’s the very thing that high-fee-charging fund managers tap into when they sell you a retirement plan.

You sign up for a retirement annuity and gloss over the fees because you’re sure it won’t make that much difference. Or, you’re confident that your actively managed fund will sufficiently outperform the market and more than make up for the fees in the long run. But when you compare the performance of active and passive investments over time, it turns out that it’s often not the case.

The Standard & Poor’s Indices versus Active Management (Spiva) scorecard compares the performance of actively managed funds, in which managers make specific investment decisions with the goal of outperforming the investment benchmark index, and passive funds, which aim to track rather than beat the market, usually by mimicking an existing index.

The latest scorecard showed that an overwhelming majority of active fund managers underperform the market. In other words, they do worse than their passive counterparts.

Proceed to Source : M&G

Late-Starter – Are you also worried that you may have left things too late?

I met a guy recently, I will call him Journey-Man.

Journey-Man is a guy who started asking himself some tough questions about savings and investments. At some point in the not too distant past Journey-Man started wondering if he had left things too late. He started thinking about this more and more and decided to take a journey of discovery.

Join us as we follow Journey-Man as he tries to answer that question ‘Have I left things too late?’

 

Proceed to Source : WellSpent