“An investment in knowledge pays the best interest.” (Benjamin Franklin)

Private credit has become one of the fastest‑growing corners of global finance, attracting interest from pension funds, asset managers, and institutions worldwide. Even though this trend doesn’t require you to adjust your own investment strategy, it’s still valuable to understand what’s happening behind the scenes when a new asset class starts making headlines.

For many people, the term “private credit” still carries echoes of an older world: desperate borrowers, predatory lenders, and sky‑high interest rates. That image is outdated. Modern private credit is structured, institutional, and increasingly central to how businesses access funding. Understanding why it’s booming helps you stay informed, confident, and connected to the broader financial landscape.

What is private credit?

Private credit simply refers to lending that happens outside the traditional banking system. Instead of banks providing loans, private credit funds step in. These funds are run by professional managers and backed by investors such as pension funds, insurers, and asset managers.

The borrowers in private credit aren’t individuals, they’re businesses. Most are mid‑sized companies or specialised lenders that need capital to grow or support their own clients. These loans are formal, well‑structured agreements with proper oversight, handled by established businesses and professional lenders.

The forces driving the private credit boom

Private credit didn’t suddenly appear out of nowhere: it’s been building for years as the financial world has shifted. After the 2008 financial crisis, banks became far more cautious and tightened their lending rules, which left many businesses struggling to access funding. At the same time, investors were searching for better income options because traditional bonds offered very little yield for more than a decade. And while banks were becoming slower and more rigid, private credit funds were able to move faster, offer more flexible terms, and tailor their lending to the needs of growing businesses. For many companies, that combination of speed and flexibility made private credit an attractive alternative. As these trends unfolded, private credit naturally found room to grow.

Why this still matters for everyday investors

Private credit matters, even if you never invest in it, because it shows how financial markets adapt when traditional lenders pull back and new players step in. It also highlights how small and medium-sized businesses, which often struggle to access funding through banks, are finding new ways to grow. At the same time, institutions have been drawn to private credit because it offers steadier income and lower volatility than many traditional investments.

For individual investors, understanding trends like this reinforces the value of having a long‑term financial plan that isn’t swayed by every shift in global markets, but is strengthened by staying informed.

Clarity creates confidence

Private credit is booming because it meets real needs: for borrowers who want flexibility, and for investors who want yield. It’s structured, institutional, and increasingly transparent. While it’s not an asset class most individual investors need to pursue, understanding it helps you stay connected to the broader financial world.

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 investor’s chief problem, and even his worst enemy, is likely to be himself.” (Benjamin Graham)

A different conversation

One of the privileges of working with clients over many years is noticing how their questions evolve. A decade ago, most conversations about investing centred on protecting wealth from the next financial crisis. Today, we find ourselves hearing something rather different. Increasingly, clients are asking whether they’re being too cautious.

It’s a change, for sure. Investors have already been through the Global Financial Crisis, Brexit, a pandemic, soaring inflation, sharply higher interest rates, wars, trade disputes and, most recently, uncertainty about artificial intelligence. Every crisis seemed to arrive with the same message: this time would be different. But businesses adapted, economies adjusted, and markets recovered through periods of severe volatility. Those investors who remained disciplined were generally rewarded for their patience.

That is exactly what long-term investing is supposed to achieve. It’s also prompted us to wonder whether repeated recoveries have quietly changed something else: not the markets themselves, but the way many of us think about risk.

The danger of familiarity

Increasingly, clients have been asking whether they are being too conservative. Their reasoning is difficult to fault. Every major setback has eventually become another reminder that markets recover. If markets are able to absorb almost everything eventually, do we still need quite so much in bonds and cash?

Psychologists have studied this behaviour for decades. They call it recency bias: our tendency to believe that recent experience is the best guide to the future. Closely related is normalisation bias, where repeated exposure to the same event gradually makes it feel ordinary rather than exceptional.

It’s not that investors suddenly get aggressive. Usually, the change is much more subtle. Diversification starts to seem like overkill. Holding cash doesn’t seem efficient. Defensive assets seem to detract from returns rather than shield wealth. Unconsciously, we start to read the uncertainty of the future through the prism of recent success.

The markets haven’t become less risky, we’ve become more familiar with risk. Those are two very different things.

History has a longer memory

History offers reasons for both confidence and humility. Diversified markets have repeatedly demonstrated remarkable resilience over long periods, rewarding investors who remained committed to their plans. At the same time, no two crises unfold in quite the same way. The banking crisis of 2008 was very different from the pandemic, which was very different from the inflation shock that followed. Today’s uncertainties, ranging from geopolitical fragmentation to artificial intelligence, will present challenges of their own. 

Every crisis introduces itself as something the world has never seen before. History usually takes a more balanced view. It reminds us that recoveries are rarely predictable, comfortable or identical to those that came before. Respecting that uncertainty is very different from fearing it.

The behaviour gap

One of the more sobering findings in investment research is that markets don’t always disappoint investors; investors often disappoint themselves. For decades, independent research house DALBAR has tracked the returns earned by investment funds against the returns actually achieved by the people invested in those funds. The gap is surprisingly persistent, and the explanation has very little to do with poor investment selection. Instead, it reflects a very human tendency to allow emotions to influence decisions. Investors often become most optimistic after markets have already risen and most cautious after they have already fallen, buying when confidence is high and selling when fear takes hold.

The lesson is a simple and very uncomfortable one. Behaving well is as important as picking the right portfolio when it comes to long-term investment success. Markets have proven time and time again that they can bounce back from periods of uncertainty. But investors don’t always stay invested long enough to see those recoveries play out.

Perspective is the real value

That’s where good financial advice comes in. We can’t predict the next crisis or say when markets will come back. But we can provide perspective when recent experience is distorting judgement.

Financial planning has never been about predicting tomorrow’s headlines. It’s always been about ensuring tomorrow’s headlines don’t derail today’s well-considered plan. The world will continue to surprise us, but successful investing has never depended on eliminating uncertainty. It’s always been about building portfolios – and the discipline – to withstand it.

If you’d like to discuss anything in this article, please do give us a ring.

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

“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