So 
it looks like the “fuss” is all over and the equity market is set to run even further…I guess it is at times like these that you need to make sure you are “in for the ride” and not sitting on the sidelines watching it all go by. But it is also important that investors do a little “stock take” (pun intended) and understand/remember the following…afterall, has anyone seen the fat lady sing yet?
- Investing takes time – equity markets can be extremely volatile – remember the past year? They can and do move rapidly in the short term (up and down) and so, if you don’t have time, you cant afford to invest into equities solely (diversify).
- You cant time the markets – if you moved to cash a while back (after the market fell) and are still sitting there – sorry for you! You have missed the best part of the rally. You are either in or out – you cant be both and you cant time it right either!
- Learn to ignore the noise around you – have a plan (know why you are doing what you are doing) and stick to it. Don’t be swayed by the noise.
- Cash is not necessarily a “safe” or “low risk” option – it hardly ever beats inflation over time. And as an investor, inflation is your biggest enemy.
- There are probably still some significant risks in the financial system – share prices have run hard in anticipation of earnings…there are plenty of people trying hard to talk the market up but if there are earnings disappointments then expect to see some more down days…
- Inflation risk is still on the upside – big time – just imagine what the increase in electricity price increases is going to do to inflation (we are not alone in this – the UK is facing similar problems). Tradtionally high inflation is not good for shares…but it could still be a while before we see any siginificant increases in inflatio
n.
Bottom line is this – have a plan and stick to it! If necessary find a good financial planner/coach who will guide you through this and coach you to stay the course.
The Financial Coach™
Tags: cash, Inflation, investing, Investments, market timing, markets, Risk
Been investigating buying a new car. Why? Because the old one is a 13 year old Isuzu double cab KB260 with 206000 km on the clock and it has an 85 litre petrol tank that will do about 650km in town. It’s old and it’s not very fuel efficient. In fact, last month it consumed about R1300’s worth of petrol…and the clutch packed in which cost me a futher R1500 but other than that, it is great, it is paid for and it allows us to get to places most people cant…and I almost got rid of it…
Because as I read somewhere, “the philosophy of materialism is hinged on discontentment”…and so I started investigating.
I looked at a 2008 Nissan Grand Levina – a 7 seater with 1500
0km on clock for ±R130000. It seems like a bargain and it will be much more fuel efficient! I even went for a test drive!
Well thank goodness the average car salesman is so busy that they dont get back to you when they say they will…because this gave me more than a few days to think about the whole transaction.
At the moment, the bakkie costs me ±R1300 petrol each month and every once in a while there is a mechanical “issue” but at 206000 km I guess that is to be expected.
Now on to the “new” car. At R130000 it will cost me ±R2640 pm (at 8% interest) for 60 months and on top of that I would still need to pay for petrol and let’s assume that will be R650 (half of the bakkie). The total monthly cost of the new car? ±R3300 – that is R2000 more than I am currently paying each month! Why would I do that?
So the plan is to keep the bakkie and save the R2000 that I would be spending on the new car. At 8% interest per annum and an inflation linked escalation, I should have about R170000 in 5 years time and I will be able to pay for the new car with cash.
Now I just need to learn the secret of
being content…
Tags: cost of finance, new car
A wealthy businessman was horrified to see a fisherman sitting beside his boat, playing with a small child.
“Why aren’t you out fishing?” asked the businessman.
“Because I caught enough fish for one day, “replied the fisherman.
“Why don’t you catch some more?”
“What would I do with them?”
“You could earn more money,” said the businessman. “Then with the extra money, you could buy a bigger boat, go into deeper waters, and catch more fish. Then you would make enough money to buy nylon nets. With the nets, you could catch even more fish and make more money. With that money you could own two boats, maybe three boats. Eventually you could have a whole fleet of boats and be rich like me.”
“Then what would I do?” asked the fisherman.
“Then,” said the businessman, “you could really enjoy life.”
The fisherman looked at the businessman quizzically and asked, “What do you think I am doing now?”
Tags: life, money, Retirement
According to the latest report from the Pension Fund Adjudicator, there are currently about 14900 unresolved cases (complaints) that they are still dealing with and this is on top of the 8275 cases that they have resolved this year.
The Financial Services Board is also struggling with a significant backlog in their case loads and are unable to meet their own turnaround times (especially in the Section 14 transfer department).
What is clear from these stats is that:
- There is a significant number of complaints being received by the PFA (which in turn means there are some serious issues with the way that many retirement funds are being run and probably means there are some more “scandals” on the horizon),
- Both the PFA and the FSB are not able to deal with their respective workloads and appear to be significantly under-staffed. As a result, the people that they are there to serve and protect (investors) are being prejudiced.
- If you have a complaint about the regulators (FSB or PFA) there is nowhere you can turn.
So who regulates the regulators…?
Attempts to contact the FSB today have proved fruitless…the website is down as are their telephone lines.
I recently had a most disturbing (if not revealing) conversation with a board member of ASISA (the association for savings and investments in South Africa). But before I proceed, a bit of background and history on ASISA. The following is taken directly from the ASISA website www.asisa.co.za. (If you already know all of this then scroll down to “At the beginning of July…”)
ASISA was formed in 2008 by members of the Association of Collective Investments (ACI), the Investment 
Management Association of South Africa (IMASA), the Linked Investment Service Providers Association (LISPA) and the Life Offices’ Association (LOA). These associations have disbanded and their staff, assets and activities have been transferred to ASISA. ASISA was created to help facilitate an environment that promotes a culture of savings and investment in South Africa by unifying some of the key industries active in this space. The aim of this new single association is to:
• Work towards greater level playing fields. • Create an environment enabling of more holistic regulation. • Become more consumer focused. • Collectively engage with Government on policy issues. ASISA will work towards promoting a culture of savings and investment in South Africa by playing a significant role in the development of the social, economic and regulatory framework in which our members operate, thereby assisting members to serve their customers better.
As part of its mission ASISA aims to: • Actively promote a transformed, vibrant, and globally competitive financial sector that reflects the South African demographics. • Develop and actively participate in education, transformation and social development projects. • Continue to build a strong national economy by encouraging and incentivising South Africans to save. • Promote transparency and disclosure. • Endeavour to ensure ethical and equitable behaviour by members by applying a code of ethics and standards. • Help create a simple and efficient regulatory framework that promotes savings and investment. • Engage with Government to ensure the creation of level playing fields for all members while at the same time promoting healthy competition.
At the beginning of July this year, I wrote an article entitled “The Future of the entire unit trust industry hangs in the balance” http://www.thefinancialcoach.co.za/ovation-updates/ . In it I made the assertion that if Ovation investors lose money as a result of the Fidentia curators accessing their unit trust funds, then the unit trust industry as we know it is finished. The so-called legislative protection would have ceased to exist. About 2 weeks after the post, I received a letter from Leon Campher, head of ASISA, in which he expressed an opinion that unit holder’s funds are “safe”. When the Ovation court date was postponed again, I replied to his letter with a series of questions and statements. Almost 6 weeks have past since I wrote to him, but we have still not received any reply from him or anyone else at ASISA (for the record, Bruce Cameron from Personal Finance was copied in on the correspondence from and to Mr Campher – and he has also failed to take up any of the issues on behalf of the investors).
Back to the conversation…I asked the board member (in the light of their mission and aims to promote savings and investments in SA and to promote ethics and transparency etc) what ASISA was doing about Ovation and the fact that there are so many issues that appear not to be being addressed, either by ASISA or by the FSB.
His response was alarming! According to him, the bottom line is that ASISA exists to serve their member’s interests and they “do not care” about a little company called Ovation. At this stage I pointed out to him that as a LISP (linked investment service provider) Ovation would in fact have been a member of ASISA. I also pointed out to him that if investors could lose money from unit trust funds then unit trusts were no longer safe…and here the conversation got really scary. His responses were along the following lines:
• Where else could people invest i.e. was there anything else that was “better” than unit trust funds, banks nor insurance companies were not safe either?
• Ovation investors (and by implication anyone else invested via a LISP) were not actually invested into unit trusts…they were somehow indirectly invested into unit trusts and as a result don’t really have the protection offered to those who are invested directly (it would be interesting to hear LISPA’s views on this).
• Ovation was a small company and as a result it was not really on the ASISA agenda – by implication, ASISA did not really care about it as it is not a significant player.
• It was my fault for investing in a small and rotten company and despite the fact that unit trust companies, 
LISPS and insurance companies are legislated and regulated by the FSB we could not abdicate our responsibility and as such we are “liable” for investing into this “rotten apple”.
• At this stage I pointed out to him that Ovation was not always “rotten” and that legislation had in fact prohibited us from moving some of the money anywhere else. He had no response to this.
• He was also of the view that as financial planners and advisors we have a duty to investigate every single company where we invest and that we can not rely on the fact that they are “approved” by the FSB. He could not, however, advise on the frequency of the investigation that is needed. When I pointed out to him that this would have to be every time we invested money because a good company today could be a bad company tomorrow he had no reply.
• Ironically too, he is the CEO of a relatively new and relatively small asset management company…just like Ovation once was. His comments about size and new companies obviously do not apply to his operation.
What was overwhelmingly clear from the conversation is that Ovation has not really been on the ASISA agenda. It is too small and they are too busy protecting their own interests to spend time on this matter which is probably also a bit too “difficult” to address. The board members will get back into their Porsches, Mercs and Beemers and drive away to their security estates while the little old ladies eat cat food again! 
The little guy (investor) is probably going to get screwed again – unlucky for him!
While ASISA might well exist to protect their member’s interests, what they fail to grasp is that without financial planners and investors, they will not have members to protect. It is critical that the integrity of the unit trust industry is maintained and it is critical that ASISA start pro-actively addressing the Ovation issue (if it is not already too late). Failure to act will forever change the way that unit trusts are seen and will change the way the people invest. The future of the LISP industry is also at stake.
I will be writing to each member of the ASISA board individually to ask them for their response to the Ovation issue. If we receive any replies, I will publish them on this site.
This just in from FNB online banking!
It seems there is no end to the lengths that some will go to part you from your money! The ethics behind this are questionable at best…
LOTTO
We are pleased to introduce the ability to play the LOTTO via Online Banking, providing you with a convenient and secure way of purchasing your LOTTO tickets online. Winnings are paid into the account which you used to purchase the ticket automatically. Options available to play are Play LOTTO, Play QuickPick or replay from history. To play LOTTO please select your services tab and select LOTTO.
My advice to you is to stay far away from this – read the earlier post if you need convincing
There is an old song where the lyrics went something like this “the chances of anything coming from Mars are a million to one, but still they come!”
At least the odds were better than the chance of you winning the lotto in SA where your odds are one in 13 983 816 (or 0.000000072%)*.
Let’s put this in perspective: if there are 2 draws per week (104 per year) then you would need to play the lotto every draw for 134459 years to have played it ±14 million times and to be reasonably sure that you would win it just once. The slogan used to be “if you’re not in you can’t win” but it if they are honest it should probably be “even if you are in you probably won’t win”!
Now if the average life span is 75 years then the average person will live for 27375 days and then simply put (and not complicating things with actuarial tables) the chance of dying on any given day is 1 in 27375 or 0.000037%. You have a 511 times greater probability of dying on any given day than you do of winning the lotto!
In June 2003 it was reported that 27% of lottery players were unemployed and that 43% of players earned less than R2 000 a month. 2006 research found that 82% of South Africans played the lottery once a week and that 53% of the population did not engage in any other form of gambling. The average player spent R81 per month on the lottery with the lottery accounting for ±26% of total gambling spend in SA. Those who play slots spend R541 per month on average, and slots constitute ±44% of all gambling expenditure in the country.
Research was also conducted into gambling spend by disposable income groups, and this confirmed that all income groups are playing the lottery regularly. 70% of those who are in the lowest income groups (disposable incomes below R1 400 pm) play the lottery regularly.
So if the odds of winning are so ridiculously low why do people still play it? Can you really gamble with your head? The real motivator for playing is that one very, very small chance that you might just win that jackpot which could change your life forever – although this might be in ways you’ve never contemplated. (More than a few lotto winners have died quite soon after winning, either from natural causes or from crime related incidents).
So if the motivation for playing is the ability to change your life once and for all, why not invest that average lotto ticket money? If you took the R81 per month and invested it into a unit trust fund where you got a return of 5% better than inflation then you would end up with ±R1.1 million after just 17 years**. If you were hoping to get there by playing the lotto then by that stage you would have played 1768 times – still far short of the 14million required to ensure a reasonable chance of winning. (If money spent on the slot machines was invested, it would take just seven years to get to the million).
So how about it? Think twice about buying that lotto ticket and rather put the money to work for your future by investing it. This would be a real chance to change your life for good!
That’s all for now.
Gregg
*the new power-ball lotto has odds of 1 in 24 million.
** assuming a real return of 5% & an inflation linked escalation on the contribution.
Tags: gambling, investing, lotto, probability, Savings
Results from the American Demographics poll showed that retirement is more difficult than becoming a parent or than getting married*. Those that felt retirement was the most difficult adjustment said that they struggle with the monotony, boredom, lack of purpose and lack of intellectual stimulation that traditional retirement offers. So if this is the case, why is there still such a one-dimensional approach to retirement from the financial services industry as a whole?
The focus has traditionally been on the financial side with little thought or emphasis being given to the emotional/psychological side of retirement. This has been largely driven by the financial services industry (insurance companies) and their focus on getting people to put money away (into their products) for retirement. If the stats are to be believed though then it has been hopelessly unsuccessful and very few (South Africans) will retire financially independent…
When the concept of retirement was first introduced (1930’s), the retirement age was older than the average life expectancy and anyone who did make it to retirement was not expected to live for more than 20-24 pay checks. These days, it is expected that many people will live for 20-30 years after retirement and some stats even suggest that some may be retired for almost half of their lives if we continue with the traditional approach to retiring at 60-65! Little wonder that few can afford it financially!
But what if we never stop working altogether? What if we just work differently or less? What if we continue working after we’ve “officially” retired? Could more of us then “afford” to retire? I recently met an 80+ year old doctor who was studying so that he could specialise further. Was he working because he had to? Nope; because he loves what he does! For him, work is not a means to an end (retirement), it is a way of life (a vocation or calling). While he can, he will always be earning – it might be less than it once was because he works fewer hours per day and fewer days per week, but in this scenario, the “huge pot at the end of the rainbow that he once needed” is no longer a necessity. Not only does he have longer to accumulate that pot, but he will also need to draw off it for a much shorter time period than someone who stopped working at 65!
It is also interesting to read that over 1/3 of male retirees in the US go back to some form of work within one year of retirement and over 2/3 of them take full-time jobs. Far too much emphasis is being placed on the financial aspect of retirement and not nearly enough is being given to the “other” aspects of retirement. Retirement is not a financial event, it is a life event and we need to plan accordingly!
That’s all for now…
Gregg
*41% of people polled said retirement was the most difficult adjustment of their lives compared to 23% who said it was parenthood and 12% who said it was marriage.
Tags: Retirement
After having been a client of Std Bank for 19 years I finally had enough of the ridiculous bank fees that I was paying (R185 flat fee) and moved to Nedbank (R65 for the same thing and an annual saving of R1440!). The process was a lot easier than I had anticip
ated and is something that I should have done years ago.
I did quite a bit of shopping around and apart from Capitec Bank, Nedbank was the cheapest option that I could find. They offer a flat fee of R65 per month for what appears to be unlimited transacting on a current account. I dont get a cheque book and I dont get any paper statements (big deal). The best that Std Bank could offer was R87 and then it was not unlimited transacting. At the time, FNB’s option was R79 pm and ABSA had nothing to offer in that price range.
So I moved to Nedbank and so far so good, except for internet banking.
I am in the fortunate position to be able to compare all of the major banks’ internet banking offerings. I have used Std Bank for years (and still use it for a business account), I am now using Nedbank and I do internet banking for 2 ABSA clients and 1 FNB client.
Sadly, Nedbank is the worst. It seems their site was developed when computers were developed – it is archaic, restrcitive and not very user friendly. ABSA and Std Bank are good and pretty user friendly but I think that from an internet banking experience, FNB has got to be tops. It feels good, looks good and it is easy to use! You appear to be able to do just about anything.
For example you can set up a monthly payment to someone else with no end date. At Std Bank you can load it for 12 months at a time while at Nedbank you can only do it 1 month at a time – still need to get used to that but am hoping too that they will “get with it” soon!
All of the internet offerings have similar secuirty levels to log in (FNB only requires a user name and password) but all of them require you to enter a one-time password to add or amend beneficiaries. Nedbank has a very frustrating “terms and conditions” page which you need to accept each time you log in. I guess the danger is that you get so used to it that you dont read it and miss them making changes to it…let the banker beware!
One very concerning feature about ABSA internet banking is the amount of “phishing” that I am subject to. Each time I use their internet banking I get an email the next day advising me that there has been “unusual” activity on my account and that I need to login in to sort out some or other details – it is quite clearly a scam but what is very worrying is that “they” know that I have been on the ABSA site.
All in all I am still happy at Nedbank and will give it a few more months. What this whole experience has taught me is that it is a mission to move bank accounts, but not nearly as much of a mission as we think and not even close to what the banks would have us believe. If you are not getting the service and fees you think you should then vote with your feet – it is the only way that the banks will take notice.
That’s all for now!
Gregg
Tags: bank fees, internet banking
With interest rates having fallen so far and the possibility of still more cuts on
the horizon, anyone looking for interest income is pretty hamstrung at this stage. Money market rates are 7% per annum and many of the banks are offering “exceptional rates” for 1 year fixed deposits. They will even “enhance” this if you are over 55.
For anyone who is prepared to be locked in for a while there is an even better option that has been overlooked while short term interest rates have been high and that is the RSA Retail Savings Bond. It is a 2, 3 or 5 year option that is being offered by the SA Government (National Treasury) directly to the public and the interest rates are far better than anything else out there (and there are no fees to get in). The only “catch” as I can see it is that you are locked in for the period (you can exit after 12 months but there will be an exit penalty). The rates are in the table below but for more information on this go to www.rsaretailbonds.gov.za
CURRENT INTEREST RATES
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They also have an inflation linked option which is also quite attractive.
That’s all for now
Gregg
Tags: fixed deposits, interest rates, money market, rsa retail bonds
