Masterful Strategy

“Money makes money. And the money that money makes, makes money.” (Benjamin Franklin)

As investors, it feels like we have a lot to worry about. We want to know which funds are going to perform best. We listen for predictions about whether the US stock market is going to keep running, or if the JSE will outperform it. We wonder what the higher oil price is going to do to our investments.

However, all of these things are really outside of our control. Focusing on them is therefore not the most effective or efficient way to improve investment outcomes.

What is guaranteed to make a difference, however, is something that is often overlooked: the time we give our money to compound. No matter where or how our money is invested, time is ultimately the most important factor in determining how it will grow.

Starting early

There is no better way to think about this than the power of South Africa’s tax-free savings accounts (TFSAs). Originally launched in 2015, government recently raised the annual contribution limit to R46 000 per person.

If you use that allowance wisely, these are one of the most potent wealth-creating tools available to local investors. And if you as a parent or grandparent make contributions into one for a child, the results can be mind-boggling.

Consider what would happen if a TFSA was opened in a child’s name on the day they were born. This has to be done by a parent or legal guardian, but once it’s established, anyone can contribute to it. If their family invested R3 800 for them every month from that moment, this would just about meet the annual limit of R46 000.

Currently, the lifetime limit is R500 000, which you would reach around the time they turned 11. If the investment grows at a reasonable rate of 9% per annum, the TFSA would by that point have increased to R851 000.

The tax-free miracle

It’s what happens from this point that is truly astonishing.

Even if the government never increases the lifetime limit, and so you never add any more to the account, the value of that investment will grow as follows if it is never touched:

By the time the child turns 18, their account will hold R1.5 million.

At age 21, they will have R2.1 million.

When they reach their 30th birthday, they will have R4.7 million.

By the age of 50, the account will have grown to R28 million.

And if they decide to retire at 65, they will have R108 million!

Making a reasonable assumption about inflation, that would be worth around R11.5 million in today’s money.

It gets better

Bear in mind, this is the amount the account would accumulate if the government never increased the lifetime limit. It is, however, not unreasonable to assume that this will happen in future, since the annual limit has already been pushed up twice.

If that happens, and you are able to keep contributing R3 800 per month into the child’s TFSA until the day they turn 18 at a return of 9% per year, they will already have R2 million at that point.

If that investment is never added to or touched again, when they reach 65 it will have grown to R138 million! That would be the equivalent of around R15 million today.

What that means is that if you are able to consistently maximise a child’s TFSA until they turn 18, that would have gone most of the way to funding their retirement. You would have largely taken care of their most important financial imperative.

And that is all due to something entirely within your control: giving that money the maximum amount of time to grow.

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

“South Africa is a country where you can lose hope quickly and then find it again just as fast.” (Trevor Noah)

Perfect is never an option

There are days in South Africa when optimism feels less like a personality trait and more like a decision. The headlines can be overwhelming. The economy is unpredictable, politics often feels dramatic, and the rand is shakier than a seagull in a Cape Town storm. Yet despite all of this, South Africans still build businesses, come up with extraordinary ideas, create wealth, emigrate successfully, reinvent themselves when necessary, and somehow keep finding ways forward.

There is probably something important in that. While financial commentators spend endless time analysing interest rates, elections and market cycles, successful investing often comes down to something less measurable: behaviour.

And South Africans tend to possess surprisingly strong investing behaviour.

We’re comfortable with complexity

Spend enough time overseas and certain South African traits become surprisingly obvious.

At the risk of generalisation, South Africans tend to be socially confident people. They speak easily to strangers, integrate quickly into unfamiliar environments, and tend to function relatively well across different cultures and social groups. There’s a flexibility to us Saffers that can be difficult to explain to people raised in more predictable societies.

When circumstances shift here, we adjust because we are accustomed to doing so.

That flexibility matters financially. Markets rarely reward investors who react emotionally every time the environment shifts. Long-term investing requires the ability to withstand periods of discomfort and temporarily disappointing results without abandoning the broader plan altogether.

South Africans have spent much of our lives developing that muscle without even realising it.

The only certainty is … Uncertainty

Investors often imagine that successful wealth creation comes from making perfect decisions at exactly the right time. In reality, most long-term wealth is built imperfectly. People invest during noisy political cycles. They invest through market corrections, recessions, elections, currency weakness and uncomfortable headlines. You can’t press “pause” until conditions become ideal.

South Africans understand this instinctively because waiting for complete certainty here is like banking on the Proteas winning the Cricket World Cup.

For decades, local investors have navigated changing governments, inflation spikes, interest-rate cycles, load shedding, global crises and periods where public sentiment became deeply pessimistic. Yet many of us continued investing steadily throughout those periods.

Obviously, we would have preferred a more positive backdrop. But you can only play the cards you are dealt.

We respect effort

We’re not just good at investing. There’s also something unusually entrepreneurial about South African culture. Perhaps it comes from necessity. Perhaps from history. But South Africans generally admire people who build things. We respect hard work, reinvention and initiative in ways that some societies no longer do openly.

In countries dominated by tall poppy syndrome, visible ambition can sometimes make people uncomfortable. South Africans, by contrast, are often unusually supportive of people who start businesses, pursue opportunities abroad or rebuild after setbacks. That attitude creates a healthier relationship with long-term ambition.

Good investing requires exactly that kind of mindset. Wealth creation is rarely dramatic. More often, it is the gradual result of consistency, discipline and the willingness to continue making sensible decisions day after day.

C is for calm

One of the biggest dangers in investing is emotional overreaction. Investors often damage perfectly good long-term strategies when they become consumed by fear during downturns or overly euphoric during periods of optimism. In the long run, markets tend to punish extreme emotions.

South Africans, for all our frustrations, are often more emotionally balanced than we realise.

We underestimate ourselves financially

The irony is that many South Africans remain surprisingly pessimistic about their own long-term prospects. Maybe it’s because we are so accustomed to hearing about what is broken in our country.

But the facts tell a different story. While poverty remains a huge challenge for much of our population, many middle-class South Africans are improving their financial situations year on year.

For all the frustration that comes with living here, South Africans may possess one of the most underrated investing advantages in the world: the ability to keep moving forward even when conditions don’t feel perfect.

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

“The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological.” (Howard Marks)

Investing has changed significantly over the past decade. What once required a stockbroker, paperwork, and significant capital can now be done in minutes from a smartphone. Millions of people, including South Africans, are investing independently through online platforms, low-cost ETFs, and offshore trading accounts.

In many ways, that’s a positive development. Lower barriers to entry have encouraged more people to take ownership of their financial futures. But accessibility doesn’t guarantee good investment decisions.

The uncomfortable truth is that while entering the investment market has got easier, managing wealth successfully over the long term remains surprisingly difficult. Not because markets are inaccessible, but because human behaviour is complex.

Information overload

One of the biggest risks facing DIY investors today is not a lack of information. It’s the overwhelming abundance of it.

Investors are constantly exposed to financial podcasts, TikTok commentary, YouTube “experts”, Reddit forums, and social media threads confidently predicting what markets will do next. The result is that many people feel highly informed while becoming progressively less disciplined.

There is a significant difference between consuming financial content and building a coherent long-term strategy.

This often leads to what behavioural economists call “herding”: following what appears to be successful without fully understanding the underlying risks. A fund or share that suits one investor’s circumstances may be entirely inappropriate for another’s risk tolerance, time horizon, or tax position.

Easy to buy, harder to build

DIY platforms themselves are not the problem. Many are excellent tools. The challenge is that the interface’s simplicity can be misleading. Buying an investment is easy. Constructing a resilient portfolio is considerably harder.

Many DIY investors unintentionally build portfolios around excitement rather than planning. They accumulate investments one idea at a time – a global ETF here, a technology share there, perhaps some offshore exposure after reading a bullish market article – without considering how the pieces all fit together.

The result can be overlapping holdings, excessive concentration in one sector or geography, duplicated risk, or portfolios that are poorly aligned with long-term financial objectives.

The emotional toll

One of the more subtle dangers of DIY investing is psychological. When investors manage their own portfolios, there is often a temptation to monitor markets constantly and react to every piece of news. Daily market movements begin to feel deeply personal. Activity creates the impression of progress, even when it may be quietly damaging long-term outcomes.

Ironically, some of the strongest investment results historically have come not from constant intervention, but from restraint.

This is where a good financial advisor can add significant value. Not necessarily through dramatic market predictions, but by preventing emotionally driven mistakes. Trying to time the market, panic-selling during volatility, or chasing fashionable investment themes can have a far greater impact on long-term wealth than many investors realise.

Beware the tax man

Tax is another area where DIY investing becomes more complex than many investors initially expect.

Frequent buying and selling may seem harmless, but if investment activity begins to resemble trading rather than long-term investing, the South African Revenue Service may tax profits as income rather than capital gains – potentially resulting in a significantly higher tax rate.

Offshore investing introduces additional complications. Investors who directly own US-listed shares may mistakenly expose their estates to US situs tax upon their death.

While all investors should utilise Tax Free Savings Accounts, many investors don’t understand that excess contributions can trigger considerable tax penalties.

Good advice is often invisible

Perhaps the biggest misconception surrounding financial advice is that its value lies purely in outperforming markets. In reality, much of good financial planning is about helping investors avoid costly mistakes and make better long-term decisions.

A qualified advisor may prevent a client from overexposing themselves to a fashionable investment theme, retiring too aggressively, giving away capital they may later need, or making emotional decisions during periods of uncertainty.

Successful investing is often less about brilliant decisions and more about avoiding damaging ones.

DIY investing can absolutely work for disciplined investors who have the time, temperament, and expertise to manage complexity over the long term. But successful investing requires far more than access to a platform and a few good investment ideas.

It requires patience, structure, emotional discipline, and an understanding that wealth is built not only through returns but through the avoidance of unnecessary mistakes.

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

“Government has been exceptionally able in printing money and creating promises, but is unable to print gold or create oil.” (Warren Buffett, 1979 shareholder letter)

While we entered the year expecting orderly rate cuts, easing geopolitical pressure, and a growing world economy, we now face the worst-case inflation risk: NACHO – Not a Chance Hormuz Opens. At the time of writing, May had seen a series of failed diplomatic attempts to secure an end to the war between the US and Iran, with the priority being opening the Strait of Hormuz and thus allowing 20% of the world’s oil to flow freely again.

Against this backdrop, global markets spent most of the month in a tug-of-war between better-than-expected US corporate earnings on the one hand and concerns about the war’s impact on the macro economy on the other. When the dust settled they had ended the month higher, though some analysts are seeing the equity market’s rally as increasingly fragile and underpinned by shaky fundamentals.

NACHO and the inflation comeback nobody wanted

In May, Brent crude briefly traded above $110 per barrel as the Strait of Hormuz remained closed and US-Iran negotiations stalled. There’s even been talk of NACHO (Not a Chance Hormuz Opens), a worst-case tail risk facing markets.

This has meant the Federal Reserve, which opened 2026 with two rate cuts priced in by futures markets, is not expected to cut again this year, and Europe is moving in the same direction. The phrase that dominated May’s investor communications across every major global investment house was the same: “higher for longer”.

South Africa: Caught in the crossfire

As a net fuel importer, South Africa’s April CPI surprised sharply to the upside, increasing to 4.0% year-on-year versus 3.1% in March – the highest reading since August 2024. The jump was driven almost entirely by fuel prices, but second-round effects are already visible in transport costs and food inflation.

The South African Reserve Bank has held the repo rate at 6.75% for two consecutive meetings, before raising it 25 basis points at the latest MPC meeting. For South African investors, this means the tailwind of a rate-cutting cycle may be reversing.

Navigating the higher-for-longer reality

So, what should South African investors be doing to position themselves for this shift in the global macroeconomic landscape? Here’s a checklist of what to consider when higher inflation and interest rates are on the horizon:

• Fixed income inflation-proofing. Long-dated bonds are more sensitive to interest rate moves, while shorter-duration instruments, floating-rate bonds, and inflation-linked securities offer better protection in a rising-rate environment.
• Inflation-resistant stocks. Energy stocks, gold miners, materials companies, and other businesses with pricing power have historically outperformed during periods of persistent inflation. South African gold miners, in particular, are positioned to benefit from higher bullion prices.
• Prioritise quality in equities. Companies with strong balance sheets, durable cash flows and consistent earnings are better placed than speculative growth shares.
• Diversify. A weaker rand and rising domestic rates make the case for geographic diversification even more compelling.
• Maintain liquidity. Holding a higher cash or money-market allocation preserves flexibility.

While the investment landscape is rife with uncertainty, the fundamental investment case for South Africa has not collapsed, and a resolution of tensions in the Middle East would remove a significant headwind to growth and inflation. However, higher inflation is unlikely to be a passing phase.

*All facts and figures accurate at time of writing.

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