Masterful Strategy

“Some things are up to us and some things are not up to us.” (Epictetus)

Investing can often feel hard. The keys to success may seem daunting.

Is your fund manager making the right decisions? Is the market going up or down? Is the rand strong or weak? These things often play on our thoughts and cause us to worry about our investment plan, particularly because they’re not things we can do anything about (and they’re often the same for everyone).

But the truth is that success in investing doesn’t really rest on any of them. What really matters in the long run are three simple things that are actually in your control – how much you’re paying in fees, how much you invest, and how long you stay invested.

These are far more significant than the worries that tend to grab our attention as investors, and here’s why:

1. Control costs: Small savings add up

Investment costs are one of the few predictable aspects of investing, making them an easy win. Whether you’re investing in a retirement annuity, a unit trust, or a tax-free savings account, every fee that you pay effectively comes out of your return, reducing the effect of compounding. And while fees might seem negligible on a yearly basis, they add up significantly.

Take, for example, two investors, both of whom invest R100,000 for 20 years. One investor pays annual fees of 2%, while the other finds a lower-cost option charging just 0.5%. At an average annual growth rate of 8%, the low-cost investment grows to R466,000, while the higher-fee investment only reaches around R377,000. The extra 1.5% in fees ends up costing over R90,000 – nearly the initial investment amount!

Simply put: by keeping your costs low, you keep a more significant share of your returns, which is crucial for long-term growth.

2. How much you invest: Build wealth through consistency

Another major factor within your control is the amount you save and invest. It’s simple: the more you invest, the more capital you have working for you, compounding over time. Regular contributions, even during market downturns, help you capitalise on periods when asset prices are low, giving you better returns in the long run.

Consider the experience of two investors over a 20-year period. The first invests R1,000 every month, and the second R1,200. This may sound like a small difference, but if both investors receive the same 8% annual return, the first will reach R589,000. The second will have R707,000 – over R100,000 more!

For South Africans, starting early and saving regularly is particularly important given our relatively high inflation rate. The power of a disciplined saving habit helps counteract the effects of inflation, ensuring you’re steadily building wealth.

3. Time: The magic ingredient for compounding

The single most powerful force in investing is time. The longer you stay invested, the more your returns can compound, creating exponential growth. Even modest returns grow substantially when given enough time.

Let’s look at the case of two investors, each investing R50,000. Investor A leaves their money invested for 10 years at an average annual growth rate of 7%, while Investor B stays invested for 20 years. Investor A’s money grows to R111,000, while Investor B’s grows to more than double that – R246,000. By simply remaining invested longer, Investor B achieves significantly better returns.

In the South African context, where markets can be volatile, committing to a long-term view is even more crucial. Short-term currency fluctuations and economic shifts may tempt investors to pull out during rough patches. However, staying invested allows time for the market to recover, smooth out short-term losses, and capitalise on periods of growth.

The benefits of focusing on what you can control

By concentrating on costs, savings, and time, you avoid the distractions of market predictions and news cycles. Trying to time the market can lead to missed opportunities and losses. A consistent strategy is far more reliable, as it is built around principles that remain effective even as conditions change.

Consider the tumultuous year of 2020, when markets initially plummeted due to the Covid-19 pandemic, but rebounded within months. Investors who tried to “time the bottom” often missed the rapid recovery that followed, while those who simply continued their regular contributions benefited from the rebound.

Focusing on costs, savings, and time helps you build resilience into your investment strategy, setting you up for consistent growth rather than reactive decisions. While it’s normal to feel anxious about market movements, focusing on these factors that are within your control provides a much more stable foundation for building wealth.

To discuss your investment plan, speak to us.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.

© FinDotNews

“Life is what happens to you while you’re busy making other plans” (John Lennon)

Millennials comprise 25 to 35% of SA’s population, representing various interests, backgrounds, and lifestyles. It’s also helpful to distinguish between older Millennials and younger ones. The older cohort grew up with PCs and video games, while the younger Millennials were raised on smartphones and apps.

Inside your Millennial mindset

Millennials are a values-driven generation that prioritises family, community, and creativity. As digital natives (especially the younger half of the cohort), you’ve grown up alongside rapidly evolving technology and embrace new forms of communication, enjoying how they allow you to connect with the global village. Your generation also values environmentally conscious practices, often opting for eco-friendly products and sustainable living choices.

Millennials invest heavily in human capital, prioritising education and self-improvement more than previous generations. Although many gravitate towards STEM fields — science, technology, engineering, and mathematics — there’s a growing interest in social sciences and applied arts. Millennials are also known for their willingness to take risks in the workplace. Many pursue passion-driven careers, dream jobs, and side gigs while also emphasising a healthy work-life balance.

Travel is another major priority. Millennials tend to explore the world frequently, often choosing experiences over material possessions. Unlike previous generations, they are more likely to rent than buy, finding flexibility and mobility preferable to traditional homeownership.

Millennials and money

Millennials tend to be cautious investors and are often more focused on avoiding losses than chasing gains. After seeing their parents’ or grandparents’ financial struggles, they typically save more than previous generations (some studies show they save around 18% of their income, compared to Baby Boomers’ 11%).

Many Millennials are risk averse, sometimes to their detriment, as they know about economic downturns. This conservative approach can result in missed opportunities for long-term growth through compounding and equity gains. Quick to adjust based on current data, Millennials sometimes make rapid changes that might impact their investments’ long-term potential.

Millennials use social media, financial apps, and online calculators to find investment insights. They prefer digital interactions and can make investment choices with just a few taps on a smartphone. They are known to dedicate time to tracking their investments (some up to seven hours a month) and are faithful to brands that offer seamless tech experiences. Some Millennials are “crypto-curious” or drawn to robo advisers.

Living longer, planning smarter

Humans are living longer than ever before. Already, global life expectancy stands at over 70 years for men and over 75 years for women. And these figures are expected to increase rapidly due to advancements in healthcare, nutrition, and wellness practices.

A recent study suggests the maximum human lifespan could extend to 150 over the next three centuries. This calls for investing more in equity for retirement.

Navigating your financial future with smart tools

Many Millennials find online calculators and tools valuable for guiding their financial decisions. You can find all kinds of calculators online, including:

• Retirement calculators: Estimate how much to save monthly for a comfortable retirement.
• Goal calculators: Use this tool to determine monthly contributions to achieve specific goals, such as paying for Junior’s varsity education or taking an overseas trip.
• Investment selector tools: Like Tinder for investments: match with investment options that align with your risk tolerance and timeline.
• Tax-free investment calculators: See how much tax you can save over time by investing in tax-free funds.

These tools are designed to inform and educate but don’t replace professional advice. Consider them a learning resource to help you understand your financial possibilities.

The power of a personal financial guide

While relying on digital tools alone is tempting, it’s worth putting in the time to build a relationship with a trusted financial advisor. Digital tools and robo-advisors lack the personal context essential for complex financial decisions.

A good advisor knows what makes you tick. And they can use their experience to help you ride out market fluctuations and keep your investment strategy on track for the long haul.

By all means, use those apps and calculators for quick insights – but remember that nothing beats the human touch. Investing doesn’t have to be intimidating. Take it one step at a time, leverage the resources available, and consider the balance that best suits your values and goals.

Contact us if you’d like to discuss any aspect of this article. And please feel free to share it with any Millennials in your circle.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.

© FinDotNews

“Excellence is my new habit.” (Dirk Stroda)

Athletes know that excelling in endurance sports and building wealth both require more than pure skill. They also demand resilience, patience, and discipline.

Here are six habits that top investors and elite athletes share. Read on to find out how to win your race – be it financial or physical.

1. Dare to dream big

Greatness starts with audacious dreams. Whether you’re aiming for financial freedom or the finish line of an ultramarathon, the bigger the goal, the more room for growth.

Successful wealth builders don’t shy away from ambitious targets. They know that even the most significant financial goals can be achieved with consistent effort over time. The key? Being specific. When you define precisely what you want, it becomes something you can chase relentlessly.

Running hundreds of kilometres may seem daunting, but it shifts from impossible to inevitable with steady discipline. The same goes for building intergenerational wealth: one step at a time is the only way to get closer to your goal

2. Master the art of steady progress

Accumulating wealth, like running the Comrades or completing the Cape Epic, is all about endurance. The finish line isn’t going anywhere, but rushing there often leads to burnout or injury. Successful investors know to trust the process, staying the course even when progress feels slow.

Endurance athletes know this well: pacing is the key to conquering long distances. A strong start is impressive, but the careful, strategic strides carry you to the end. There’s no prize for reaching the halfway point first. As the story of the tortoise and the hare illustrates, the victory only comes when you cross the final finish line.

3. Harness the power of expert guidance

No one wins alone. Successful investors surround themselves with seasoned advisors who’ve seen the markets’ ups and downs. These coaches can filter out the noise, offer strategic insights, and guide them away from risky choices.

Similarly, top athletes have coaches who are motivators and sounding boards. They provide clarity, feedback, and perspective, helping athletes push through doubts and unlock their full potential. A good coach doesn’t just teach you how to win – they teach you how to learn from your mistakes and grow.

4. Leverage cutting-edge tech for success

In a world where tech dominates, winning is as much about brains as it is about brawn. For investors, technology is a powerful ally. From checking your spending against your budget to monitoring portfolio performance and setting goals, smartphones have become invaluable financial assistants. (Tech is great for tracking stuff. But do remember that your financial advisor offers a big-picture human perspective that no app can compete with.)

In the same way, technology has revolutionised training in the athletic world. Athletes can monitor their pace, recovery, and nutrition in real-time. And they can use tech to identify their opponents’ weak spots. But there’s a catch. Too much information can overwhelm. Both investors and athletes must avoid ‘analysis paralysis’ – the temptation to overanalyse every move instead of focusing on the bigger picture.

5. Stay focused on the ultimate goal

The best investors understand that building wealth isn’t just about managing portfolios to balance liquidity, tax strategy, fiduciary duties, and risk. It’s a holistic process that keeps the end goal in sight, even when the details seem overwhelming. This is why it’s important to prioritise your health (mental and physical) and to spend time doing the things that are important to you with the people who matter most.

Likewise, any top athlete knows success isn’t just about running faster or harder. It’s about growing physically, mentally, emotionally, and spiritually. Without balance, performance falters, whether on the track or in the market.

6. Turn setbacks into stepping stones

Both investors and athletes know one universal truth: not everything will go according to plan. The road to success is often paved with failures, setbacks, and unanticipated hurdles. It’s how you respond to those bumps that defines your journey.

In financial planning, strategies may need adjusting when times get tough. The ability to adapt and stay the course separates the winners from the rest. The same holds for athletes: every race and every training session is a learning experience. Mistakes aren’t failures – they’re opportunities to refine, recalibrate, and return stronger.

Adopt an athlete’s mindset

At your next financial review, let’s think like athletes and focus on growing your wealth in the long term. As your financial endurance coaches, we are here to help. 

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© FinDotNews

For many South Africans, the fact that the rand weakens over time against the dollar feels like the biggest reason for investing offshore. When you think that one dollar cost less than R7 in 2011 compared to over R17 today, it seems obvious that having money offshore is imperative.

Over long periods of time, this trend will probably hold. The rand is likely to steadily get weaker. But it’s important to understand why. Primarily, this is due to South Africa having a higher inflation rate and a higher risk premium than developed markets. Significantly, both of these things mean that returns from South African assets should also be higher.

It’s complicated

The past year has been a very good one for South African investments. Local property has gained more than 50%, and both shares and bonds are up more than 20%.

Image source: Visio Fund Managers

Notably, the rand has also been strong. It’s gained around 10% against the dollar in the past 12 months.

This is only a short period, but it’s a reminder that markets never move only in one direction. After many years of South Africa underperforming, local assets have been very strong this year. This further highlights the importance of having a diversified portfolio.

In the long run, these factors and rand weakness actually tend to even themselves out. In dollar terms, the returns you earn in South Africa have actually been better over long periods of time than you could earn just about anywhere else – ours is the third-best performing stock market in the world in dollar terms in the period between 1900 and 2019.

Are you a gambler or an investor?

While the fluctuating rand often seems like the only reason you could ever need to seek refuge in offshore investments, there are far more meaningful reasons to diversify internationally.

Currency movements are notoriously difficult to predict, and the rand is no exception. Over the years, the rand has experienced periods of significant depreciation, only to stabilise or even strengthen later.

For example, the rand weakened sharply during the 2008 global financial crisis and again in 2015 during the “Nenegate” scandal. This alarmed many investors, who sent large sums of cash offshore. In both instances, the currency subsequently regained some strength, resulting in losses for those investors. Relying on these short-term movements as the main reason for investing offshore is speculative and risky, especially for long-term investors.

D is for diversification

The primary reason to invest offshore should be to diversify your portfolio, not to hedge against a weak rand. South Africa represents only a small fraction of the global economy, and offshore investments provide access to a broader range of sectors, industries, and companies that are not well-represented in the South African market.

Global markets, especially in developed economies, offer exposure to industries like technology, healthcare, and renewable energy that may not have the same growth potential locally. Diversifying into these sectors allows you to tap into global trends and reduce the risk of being overexposed to South Africa’s economic cycles.

We all know that South Africa faces many structural challenges, including political instability, slow economic growth, and reliance on commodity exports. Investing in global markets allows you to reduce your exposure to local risks and focus on economies that are more stable and diversified.

For example, the COVID-19 pandemic hit South Africa hard. However, international markets, particularly in the US and Europe, recovered quickly due to massive government stimulus packages and the strength of large multinational companies. Investors with offshore exposure were able to benefit from this global recovery.

The proof is in the pudding

The underlying growth in global equities and bonds – as opposed to the performance of the rand – is what ultimately drives these gains.

This theory is borne out in practice. Historical data shows that globally diversified portfolios tend to outperform South African-only portfolios in risk-adjusted terms over long periods.

The final word

Ultimately, offshore investing should be part of a broader, long-term plan focused on diversification, asset allocation, and risk management. The rand’s movements should not be the primary driver of this decision. Instead, you should look to global markets for access to growth opportunities, protection against local economic risks, and better risk-adjusted returns.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© FinDotNews

“Life’s tragedy is that we get old too soon and wise too late.” (Benjamin Franklin)

Born between 1997 and 2012, the youngsters of Gen Z are driving change in the investment world at lightning speed. Unlike the rest of us, they’re totally at home in a tech-driven world. For them, managing money via mobile apps and online platforms isn’t just convenient, it’s essential. Forget slow and steady approaches like retirement annuities (RAs) and unit trusts – Gen Z is all about speed, efficiency, and micro-investing.

With nothing more than a smartphone and a 5G connection, they’re fully equipped to navigate global markets, invest spare change, and even participate in crowdfunding bright ideas.

Ethical investors

Gen Z isn’t just looking for profits; they want their money to stand for something. These young investors are at the forefront of the socially responsible investing movement, putting their money where their values are. Sustainability, green energy, and ethical business practices are top priorities, and they’re not afraid to demand change.

By choosing to invest in companies that champion environmental and social causes, Gen Z is pressuring businesses to adopt better practices. Their influence goes beyond financial returns – it’s about reshaping corporate behaviour for a better and more sustainable world.

The gig economy: Gen Z’s secret weapon

Rising living costs and the desire not to be stuck behind a desk all week have seen Gen Z embrace the gig economy with a vengeance. For them, work isn’t confined to a 9-to-5. Instead, they’re Airbnb hosts and freelance providers on Upwork while also holding down a ‘conventional job’ and working digitally from cafes.

This flexibility gives them greater control over their income streams and the freedom to pursue diverse revenue sources. Micro-investing fits perfectly into this world, allowing them to put small sums of money to work for them. It’s an era of adaptability and resourcefulness, where the barriers to entry in investing are lower than ever.

But with freedom comes challenges. While the gig economy offers flexibility, it can send your work-life balance into disarray and erode traditional financial safety nets like employer-sponsored pensions and group benefits. As side gigs become main gigs, it’s essential to weigh the risks of losing core income stability.

Glass half-full

Despite these pressures, Gen Z is relentlessly optimistic about its financial future. They understand that knowledge is power and are fiercely committed to further education, constantly consuming online courses, podcasts, and articles to stay financially savvy. Their hunger for learning (and avocado toast) and their interdisciplinary mindset mean they’re pretty good at adapting to today’s ever-changing financial landscape.

Shadows on the horizon

Of course, no generation is perfect. Gen Z faces some unique challenges on their financial journey, including:

1. Market volatility: Gen Z is more likely to invest in high-risk assets like cryptocurrencies, which makes them more vulnerable to extreme market swings.
2. Trusting the machine: While apps simplify investing, relying too much on automation can lead to a superficial understanding of core investment principles.
3. Social influence: Social media is a double-edged sword. While it offers a wealth of information, it can also lead to herd mentality and impulsive investment decisions.
4. Wet behind the ears: Being relatively new to the game, Gen Z may need to learn to recognise scams or avoid common pitfalls in volatile markets.
5. Bigger picture: Particularly in regions like South Africa, where economic instability looms large, local conditions may constrain or impact investment opportunities.

Balancing optimism with caution is crucial. Gen Z must pair their enthusiasm with a good dose of old-fashioned prudence to navigate these challenges.

The bottom line

There’s more to financial planning than just investing. As advisors, we use tech-driven strategies to our advantage. Our value is helping clients weave these modern tools into comprehensive plans that also include risk mitigation and estate planning (no matter how young you are.)

Whether you’re part of Gen Z or just intrigued about how they’re shaking things up, this generation’s innovative spirit is a wake-up call. It’s not just about keeping up with the times – it’s about redefining what wealth means for the future.

Watch this space

Stay tuned for the next article in this series, where we’ll dive into how millennials continue to evolve the financial landscape.

If you’re curious about any of the above, please don’t hesitate to call us. We’re here to help, whatever your age. And please do forward this article to your Gen Z family and friends…

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© FinDotNews