New investors, horses, casinos, Lotto, Naspers, advisers and West African gold mines.

ALEC HOGG: Magnus Heystek is back with us, and that means the lines are now open for you to pose your questions on investment-related matters. I'm Alec Hogg standing by here to see if I can maybe assist a little.
    Magnus, you haven't been following this Simmers saga, have you?

MAGNUS HEYSTEK: Not much. I kind of gloss over when I read it, because it's been ongoing for a very long time. It seems to be the worst of boardroom battles, and then this crowd is in, and then that crowd is out. I haven't been following it.

ALEC HOGG: We did have a question on Wednesday to ask if you own Simmers shares what do you do with them. I suppose in a case like that you are in deep anyway, and there was a reason why you bought them in the first place - it's probably best to just stick with it.

MAGNUS HEYSTEK: You must go back to why you got into the share, and a lot of people forget why they get into shares. And, to make a comment - I really haven't been following it.

ALEC HOGG: We are going to get back to a story that Julius Cobbett wrote today on the Moneyweb site about a lottery winner getting conned out of his money to a large degree, but the lines are pretty busy, so without burning up anybody's telephone bill, what we'll do is we'll take your calls and then pose those questions in a series to Magnus. Puleng from Pretoria kicks us off.

PULENG: Hi, Alec. My question is what would you advise a forthcoming investor in the JSE in terms of buying shares? I hear a lot of advertisements and marketing.

ALEC HOGG: OK, that's a good one, Puleng. We'll ask Magnus for his thoughts on that one. Brian from Durban, hello.

BRIAN: How's it Alec? Just two quick questions. The first one: which companies deal in titanium on the Johannesburg Stock Exchange? And then secondly for a quick return would you play horses, casino or the Lotto?

ALEC HOGG:  [Laughs] OK, on to Merle in KwaZulu-Natal - hello, Merle.

MERLE: Hello, dear soul. I've got R100 000 to spare. What share could I put all of that into - I don't want a quick return, I just want something special.

ALEC HOGG: OK. Let's just take that batch of calls to start off with, Magnus.

MAGNUS HEYSTEK: I'll start with Brian's question for a quick return - casino, horses or stock exchange?

ALEC HOGG: Lotto.

MAGNUS HEYSTEK: I'd go for blondes! [Laughs] Investment is not a gamble. You can make it a gamble, but if you do it correctly it's not a gamble.

ALEC HOGG: You're in trouble, you know. When you get home tonight, Ada is going to give you a swat, because she is blonde, firstly, and I think you've got a blonde daughter as well, so you are actually in a bit of trouble. I'm only happy with my blonde daughter who's out from Ireland.

MAGNUS HEYSTEK: Fortunately they are shopping now and not lsitening, keeping the economy going. Let's go to Puleng's question. A very good one. I know there's a lot of marketing saying get involved on the stock exchange. I would say if you don't have the time and the knowledge, start with an exchange-traded fund. That gives you the exposure to the stock exchange while you are learning the game. And of course those competitions that Moneyweb has every year, where you have a fictitious amount of money...

ALEC HOGG: That's real money. Satrix 40 - are you happy with that one?

MAGNUS HEYSTEK: I'm not a great fan of Satrix 40, because I think for the average investor the risk in the Satrix is a bit high. I would rather go for the Dividend fund or the Rafi for the simple reason - we saw it last year, the Satrix had a tremendous following, with people just pumping money into the Satrix. And the more I warned against the risk building up in the Satrix because commodities were running, Satrix was actually a proxy of...

ALEC HOGG: And heavily weighted to commodities.

MAGNUS HEYSTEK: And when it fell, it fell by 45%. A lot of people don't have the emotional stamina for the Satrix. But go for one of the funds. Or, first of all, get a good unit trust fund and then start finding out how these unit trusts do it.
    Then of course, R100 000 - Merle is saying what is the one favourite share in the stock exchange right now, and I really have to say it would be Naspers. Naspers has just been a phenomenal story over 25 years, and I'll tell you something about Koos Bekker, the managing director of Naspers. You know, he's never worked for a salary in his life with Naspers. His deal from day 1 was: "I don't want a salary. I've got enough money. I want to be rewarded for my long-term vision. I built up this company, give me shares." And over time he has built up a substantial fortune because of the shares that vest with him. He's a very, very clever man, He built up Naspers - listed in I think 1983/84 at R20, R21/share and today it's R300. You can work out your numbers yourself, it's 1500%. It's been a phenomenal success story. But he's never earned a salary. He's always been given shares. And they say he's wroth between R500m and R1bn over the last 25 years. So Naspers would be my share that I put money into.

ALEC HOGG: He's a terrific human being as well.

MAGNUS HEYSTEK: He's just had vision. He came back from the States - pay channels the way to go. You saw how it all happened, Alec, and my hat off to him.

ALEC HOGG: The thing that always impresses me about Naspers is that there were four media companies roughly the same size, Naspers being one of them, and today Naspers is 16 time bigger than the second-biggest media company in South Africa, because of this vision.

MAGNUS HEYSTEK: The other ones have gone under. Perskor has just about disappeared, Times Media has disappeared, Independent is having its own problems. But it just shows you the value in management, the quality of management.

ALEC HOGG: Do you know any company on the JSE that mines titanium?

MAGNUS HEYSTEK: I don't.

ALEC HOGG: We should have had Barry Sergeant here. He would have been able to help. I don't know that either. I know Rio Tinto has got big stake in titanium.

MAGNUS HEYSTEK: There are funds offshore that - Rare Earth Fund, for instance, is managed from South Africa, ... in titanium, but that is a fund that invests in it globally.

ALEC HOGG: In fact, Brian, titanium is such a small part of Rio's whole operation, but if you really think titanium is going to be the big winner in future, and it'll be a bigger part of Rio, then you can buy it through the iDx programme on the stock exchange.
    And what about those three - c'mon, Magnus. Horses, casino or the Lotto?

MAGNUS HEYSTEK: I don't gamble. I've been to the horse-racing once or twice. The Lotto is a tax on stupidity, as they say. It really is.

ALEC HOGG: I also thought that. But I am involved with St Joseph's and St Joseph's got a lovely amount of money from the Lotto.

MAGNUS HEYSTEK: I understand.

ALEC HOGG: I'm actually going to start taking Lotto tickets, even though I know I'll never win.

MAGNUS HEYSTEK: It's a tax, an indirect tax. You think you are going to make a lot of money, but it's just an indirect tax.

ALEC HOGG: The horses - I had a horse running in PE today that paid R5 a place - made 500% in two minutes!

MAGNUS HEYSTEK: Mr Hogg!

ALEC HOGG: While we wait for the next calls, Magnus, let's pick up on that story of Julius Cobbett. The guy wins R20m in the Lotto, the Lotto recommends he goes to Standard Bank, the guy from Standard Bank invests his money, taking 3% commission on R20m - R600 000 commission for investing his money, and thereafter takes his money and puts it into a high-risk venture. And it looks like the bucks have gone.

MAGNUS HEYSTEK: I cannot understand how anyone can - I don't know how much work was involved - take R600 000. It's unbelievable! That was the first part. Secondly, how Standard Bank can allow this - and say those are the fees. I just find it immoral.

ALEC HOGG: And the Lotto can actually send the guy...

MAGNUS HEYSTEK: Well, I think they have a business arrangement, but they have gone to all of the big banks, and the big banks are more into transaction-based financial advice. They are not into long-term relationship advice. Investors must understand, when they go to certain institutions it's going to be transaction-based, and its very important to distinguish between the two.

ALEC HOGG: Just explain what that is.

MAGNUS HEYSTEK: What transaction based is, you come with the money, I'll take my maximum commission, and thereafter I don't want anything to do with you. I've given you advice, I've placed you into certain products, I'm not going to give you advice. And specially with the banks, where there's a high turnover of staff. I heard earlier this week that some of the big banks, up to a third of their investment clients are what they call "orphan clients" - that don't have an adviser looking after them, yet there are fees deducted and paid to the bank. So there's a huge amount of money being paid as advice, but there is no advice given because the initial adviser has really moved on and there's nobody there any more. But there are fees paid. So it's more than just this big commission. So you have to ask your adviser what kind of a structure do you have - are you transaction based, or are you going to give me advice on an ongoing basis? And the FAIS law is very, very clear: you've got to take responsibility for your clients' money. Most of the independent advisers have moved towards the ongoing relationship manner, and then get paid on an ongoing basis, which in my view is the best way to do it.

ALEC HOGG: Now, the average person who's going to win the Lotto, if you just take on a  law of numbers, won't be financially that literate. They would really need support and help. To then pass them on to someone who's going to take a 3% commission to begin with doesn't sound right. Surely there should be a way of maybe a deal between Lotto and Standard Bank where they charge per hour, or they charge a fee for advising, if this person needs advice.

MAGNUS HEYSTEK: There might be a transaction business arrangement between Standard Bank and Lotto, and I think it's something that you should ask Lotto. How can you send this guy with R20m, and on what basis did you choose Standard Bank? And you are not going to get independent advice, in my view. You'd get fairly biased advice with Standard Bank - or Absa or any one of the big banks. They are all into bed with their suppliers and the product suppliers...

ALEC HOGG: Standard Bank will put you into Liberty.

MAGNUS HEYSTEK: Most probably, because they might say: "Those are the products we know and understand." You are not going to get independent advice.

ALEC HOGG: It's a fascinating story. You can get it on the Moneyweb website.
    Magnus, this is our last programme for the year.
MAGNUS HEYSTEK: Of course. Our last programme for this decade, too. So yes, another milestone. Just yesterday it was the eve of 2000.

 ALEC HOGG: It seems just yesterday that you and I were working at the old Perskor building, and you were the financial editor of Die Transvaler, and I was a young wet-behind-the-ears reporter on The Citizen.

MAGNUS HEYSTEK: Time goes by very quickly, Mr Hogg, and it's amazing what slow horses and fast women can do to a man.

ALEC HOGG: [Laughs] Eugene from Port Elizabeth, how are you?

EUGENE: Hi, good evening, you two affluent gentlemen.

MAGNUS HEYSTEK: Thank you!

EUGENE: You've really made good progress over the years. I'd like to know two things. Are there any South African-based gold mines that have gone to the West Coast of Africa, because you know our mines are already too deep, have become uneconomical - to which I may just add a rider. I'm amazed that we are going to build all these coal things here, whereas we could actually draw energy from these very deep mines - just drill a bit further and we've got plenty of energy to generate turbines that run, to generate electricity, without polluting the air. But your opinions, please, about the gold mines? And the other question is: one has got an allowance that you can take overseas - does that include physical gold, i.e. coins or whatever?

ALEC HOGG: Thanks, Eugene. Magnus?

MAGNUS HEYSTEK: Eugene and I have been talking on various radio stations for many, many years, and it's always nice to hear from him. He's written books on physiotherapy. Good question. Yes, AngloGold Ashanti is involved in the West Coast, I think in Ghana...

ALEC HOGG: In Mali.

MAGNUS HEYSTEK: But the question he has, and we discussed it three weeks ago - my view on gold shares. If you want to buy gold shares - I hope old Issy is listening. Issy, listen to me now for once in your life - take your money offshore and you get far better returns. I've done the numbers, I've done some research. Your returns on global gold funds have been double what you would have earned on South African gold shares for one of the reasons Eugene mentioned; they are deeper, the grades are falling. The whole gold mining industry is shrinking. You should take your money offshore. The second part of his question: your foreign exchange allowance, does it include gold? Good question. I don't know. I would think so. I don't think there's anything that would prevent you from taking R4m worth of gold coin out of the country, but I'd like to check it out and maybe we can answer it in the new year.

ALEC HOGG: Sure. And the other company that has got a big operation in the West Coast [of Africa] is of course Gold Fields. They own the Tarkwa mine.

MAGNUS HEYSTEK: Of course, yes. But my view is if you want to go offshore, you have Canadian mines, you have Australian mines, you have American mines - your returns have been double those of South African mines over the last five years.

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