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Investment insights for 2016

Diversify and invest for the long-term.

JOHANNESBURG – 2016 is around the corner/2016 is upon us and to help you manage your investments next/this year, Moneyweb has gathered a handful of investment tips from wealth managers and stock market gurus.

Warren Ingram, executive director, Galileo Capital

The investment markets in 2016 are likely to be as rocky as 2015. Global investors will focus on interest rates in the US and the economic growth (or decline) in China. Once the markets have more clarity on these two major themes, we might get a reduction in global volatility. South Africans will need to watch the global commodity cycle to determine if there will be any change in the rand’s fortunes. Should investors see a levelling out or even early signs of a recovery in the commodity cycle, it is likely that the rand might start to recover some of its losses against the developed market currencies.

When global and local markets are so volatile, investors would do well to keep their portfolios highly diversified across a range of asset classes and international markets. Try to avoid making large bets on a single investment strategy, e.g. sending all your money out of South Africa at R13.90 to the US dollar or investing all your money in South African cash to avoid market volatility. Rather spread your investments across all the major asset classes and if you need to build up your offshore exposure, try to do so in tranches over time, not all at once.

Magnus Heystek, director and investment strategist, Brenthurst Wealth Management

My best advice to young people, savers and investors? Banish the word “retirement” from your vocabulary, especially when it is used in conjunction with the adjective “early”. Let’s say that again: there is no such thing as early retirement, and if it’s ever forced on you, you must know it’s a financial death sentence.

Stop listening to schemes, charlatans and gurus trying to convince you that you can retire at the age of 30, 40, 50 or even 60. They are setting you up for failure and disappointment.

Firstly, you won’t have enough money to retire at any of these ages, unless you inherit a humungous mountain of money. Secondly, even if you did, you need to remember that the year that you are born and the year of your retirement are the two most dangerous years in your life. Most people are defined by their careers. Do you think your retirement will define you?

Anthea Gardner, managing partner, Cartesian Capital

2016 looks likely to be a tough year for SA Inc. In an environment of lower economic growth, higher inflation, higher interest rates and lower discretionary consumer spend, I’m inclined to look for companies that are almost recession proof. The private schools businesses have proven to be in high demand and insufficient supply, and my preferred pick in this space is ADvTECH (Crawford Schools, Varsity College, Abbotts, Trinity House and Junior Colleges).

This business fits succinctly into the space between the lower-end government schools and the high-end private schools and speaks to the growing emerging middle class in South Africa. ADvTECH is planning to increase prices by 6-10% in 2016. With current cost of capital between 10-12% and targeted return of 20%, we calculate a positive impact on margins.

The recent appointment of Roy Douglas, who joined the business in 2012, bodes well for a business that saw the departure of their CEO, Leslie Massdorp, after only a few months at the helm. Douglas has been responsible for the turnaround of the tertiary business and with an R850 million capital raise on the cards, the company has guided that the money will be used to write down some of the debt and for future expansion.

Warren Buffet said “the best investment you can make is in yourself. Not only does it improve your life, but it improves the lives of the people around you”.

I believe the best way to improve self is through education, and in this regard, I’m taking a holistic approach to choosing my best investment idea for 2016.

Simon Brown, founder, JustOneLap

A key lesson we need to take from 2015 and always remember is that trends tend to continue for a lot longer than anybody expects. Resource shares started 2015 at very low levels and spent the year moving lower still. A trend is a powerful force and the best we can do is get out of the way of the trend and wait for it to play out, however long that may take.

Another key point that is likely to be important in 2016 is to be careful of the rush of initial public offerings (IPO) we’re seeing. Not all IPOs are created equal and the pop that we saw with Sygnia is proving to be the exception to the rule for 2015. Every new listing must be judged on its merits and just because a lot of people are excited about a new listing does not mean the stock will rate higher once listed.

Lastly, always know what one is trying to achieve in the market and don’t be swayed by the noise and hype that is generated. Have a clear long-term strategy and ignore short-term noise that is trying to throw you off that strategy.

Craig Gradidge, investment specialist, Gradidge Mahura Investments

2015 proved to be a challenging year for investors, although returns for the year to date are largely positive and ahead of inflation (before fees and taxes). As at the end of November, listed property continued to defy critics putting in another winning performance (+14.4%), followed by equities (+7.5%), cash (+5.29%) and bonds (+3.6%). Consumer price inflation came in at around 4.9%.

One of the main features of 2015 was the return of volatility. Listed property was down more than 11% between April and June, while equities fell more than 13% between mid-April and late August.

All of this points to timeless advice: build a suitably diversified portfolio, and hold on for the long term. A suitably diversified portfolio would have ridden out the volatility quite well, particularly if it included a decent offshore exposure.

Investors are unable to control or influence market returns and behaviour, so they should focus on the areas where they have some influence. These are their own behaviours, costs, and portfolio risk.

Investors who are able to develop a long-term perspective when it comes to their investment strategy are most likely to succeed.



Craig Gradidge

Gradidge-Mahura Investments


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I think that Mr Heystek must be removed from your panel of columnists – he writes by the seat of his pants and his above comment is the last straw in a string of questionable articles over the years – really! what kind of comment is this ? What kind of strategic thinking is he providing Brenthurst Wealth?

Opinions, including yours Maxim, are like noses: Everyone has one, and it usually has two holes in it. I can testify to a number of times when I had to admit: Magnus did warn us of this – now it has happened. One painfully true piece of advice to retail investors about 5 years ago: Stay away from resources, you WILL burn your fingers because you know too little …..!!

@Maxim….whats your gripe at Mr. Heystek?

Is it because its not cherry coated for 2016? Or perhaps his “black & white” advice to is too difficult for you to comprehend?

Is he not wrong to advise that retirement is a mirage for most of us. That most people will have too, want too continue to work post the prescribed age of 65?

Or is it because your thinking is that you will be just fine on your pension? That your “too good to be true” investments will give you a jet-set life style.

Your comment only conveys that you do not really read the scenarios between his lines of advice.

Get wise. He knows more than you I am sure.

Magnus’s comments are pure common sense vanilla and I see nothing to get worked up about. All I would add is that the year you die in is also quite dangerous. 🙂

mr heystek is the ONLY person you should be listening to

@Maxim….what in Mr Heystek piece did you object too?

Mr Heystek advice that retirement before or after 65 is a mirage for most?

Or his advice that any investment that sounds too good to be true is just that that…to good an investment to invest in?

And when you retire…do you really believe you will be chum in believing your jet-set lifestyle will start?

Don’t be a chomp……read, think before you write, speak.

Maxim I really do have to agree with Jeremiah. I would suggest that Magnus has probably knocked your retirement plans on the head and that you are now somewhat irritated.

Maxim, i do not understand your view regarding Magnus. I find his views quite refreshing in that they are less predictable and make you think a little more than the bog standard advice one reads every year, essentially saying the same thing. I do not always agree with him, but perhaps what he says in this article has merit, and could cause some people to think about their future plans. Fortunately for me i read a financial planning book written (or co authored with an Australian author) by Magnus about 20 years ago when i was 23, and taking that advice, means i could now challenge Magnus on his assertion one will never be able to retire early, but i am certainly very glad i listened to him then! So his advice in this article is quite interesting to me.

Interesting to read all these guru,s view on the future. I attended Simon browns 2016 outlook on the 7 dec and his presentation would have looked a lot different if he had done it after the 9 dec Christmas bomb Jacob gave us all. The point is the future is entirely unpredictable. Add in the fast changing world we live. And now you want to invest for the long term? Please can somebody define “long term”

All thumb suck, it can change in a minute, you just need some idiot in Government to open his/her mouth and it is all down the toilet. When they are all removed and we have a set of Mark Barnes’s running the show like a company, posting great results for the shareholders (voters) and paying dividends (ie lower taxes), then we can sit and say “based on past history, the jockeys and results this has a good chance of happening.”

It is always amusing when ” Experts ” tell us to go for the Longterm when dealing with Financial Planning . Firstly we do not have an Unlimited Life Span . Secondly no matter how Prudently and Carefully one Plans . Living in SA and being exposed to the Ineptness and total Irresponsibility of the current Government , one does not know nor can one foresee what damage can be Unleashed by Stupidity as we have just experienced . To most of us it will take another few years to undo the Damage done . So if one has to take all the Suggestions of this Article seriously , one can only Retire at 80 or 90 … ??? ( LOL ) Life has no Certainties nor any Guarantees and therefor THERE IS NO ONE SHOE THAT FITS ALL . Some can retire at 60 ( myself included ) and some may never be able to Retire . I have scaled down massively and enjoy everyday thoroughly , counting my Blessings . Trying to live in the Future and worry about it is Futile and Bad for the Health !!!

the point magnus is making (which I agree with completely) is DO NOT rush into retirement. if you are able to carry on working – do so. just as long as you can have your breaks (I have 4 a year PLUS one overseas), can decide who you want to work for and with, enjoy your work and feel you are adding to society – CARRY ON AS LONG AS POSSIBLE

as magnus has directed his comments at the young – so will I. before buying assets and creating a career – think carefully WHERE you want to carve a career. based on my experience these should be – 1) which country can offer safety to me and my family 2) which country offers world class health facilities free to its inhabitants 3) which country offers decent pension (and even unemployment benefits). AND finally is this country in the top wealthy countries of the world (to be wealthy must live in a wealthy country)? I guarantee if you do all this – your answer will be australia

Robertinsydney,you must be very homesick – you continually try to ‘add your 2 cents worth’ on SA web sites. You obviously need to justify why you left SA – hence your rantings.
Just do us South Africans a favour: butt out of our business and worry about your new home country instead!??

Dear Magnus, to avoid any more hysteria, for criticising your contribution without any numbers, all we asking for is a bit more facts about your views. Because, unlike most, there are a minuscule number of savers that diligently saved & invested and were cured long ago of “car decease”, don’t have edgars accounts, don’t buy food on credit and are paid-up with sars.

On a more serious note though, if everybody keeps on working till we need geriatrics care at the office, what becomes of all our young people also wishing to work.

There’s also an underlying concern that the sudden encouragement to never retire, possibly means that although we receive bi-annual balances of our accumulated pensions, maybe these funds are just prints and the funds are gone, and the hope is that a large percentage will die on the job from stress, if not in a car accident, crime and or another event to limit the amounts payable.

Nevertheless, we love your directness and wish you a splendid Christmas & a 2016 that exceeds all your expectations.

Send as much money offshore and buy into a Vanguard fund like VOO or VEA and maybe a balanced fund like the Janus Balanced Fund and maybe put 15% in an iShares Life Strategy (10% equity) fund, depending on your age. Put the statements under your bed and never open them for 15 years?

HE IS OUR WARREN ??? Great believer in him .

He’s more a BUFFET? Don’t you think? Still I found his directness refreshing.

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