PERSONAL FINANCE

WARNING SIGNS

Article by Satrix Investments

Are you serious enough about your money?                    

                        Four warning signs to consider                                           


1. YOU DON’T HAVE A TIME HORIZON

If you don’t know how long you’re investing for, you can’t make the most basic, but critical decisions around which asset classes you can invest in i.e. equities, bonds, cash etc. You can’t possibly understand your own risk tolerance and you don’t know how volatile returns can be. Time is arguably the most important decision when looking after your wealth.The longer you have, the better you can do, as market volatility tends to reduce over time and the power of compounding kicks in. You do however need to commit to a time frame so the plan can be thought out thoroughly.                    
                   
Virtually all Satrix products, whether you’re investing in ETFs or unit trusts are exposed to the equity market. This means you need a minimum investment time horizon of 5 years. If you don’t have this amount of time, then you need to rethink why you are investing in equities listed on the stock exchange.

               

2. YOU HAVE NO OFFSHORE EXPOSURE

If you live in South Africa, you live in an emerging market. We make up less than 1% of global GDP (Gross Domestic Product) and we have a very murky outlook where economic growth is concerned. The rand has depreciated precipitously against all developed market currencies over the past year and there is a very real possibility that international ratings agencies will downgrade South Africa to junk status before the end of the year. It would be remiss of you not to consider diversifying a portion of your assets offshore, and mainly into developed markets.                    
                   
We have listed two ways in which offshore exposure can be obtained.

OPTION 1:

You physically take your money offshore i.e. by going through the exchange control process, opening up an offshore bank account and depositing rands overseas into a currency of your choice.


OPTION 2:

Investing in rand-denominated offshore investment products. Your investment and currency exposure is foreign, but you invest in rands and get paid out in rands i.e. your money does not physically leave South Africa.

With option 2, you don’t need SARS tax clearance to invest in these funds as your investment is made in rands and paid out in rands upon disinvestment in South Africa. You are also able to set up a debit order and the lump sum minimums are a lot lower than in option 1 above.                    
                   
Please be aware that offshore investments such as these expose you to exchange rate risk, which is the risk that your investment value changes due to fluctuations in the currency exchange rate.                                       
                   
The Satrix MSCI World Equity Index Feeder Fund is a rand denominated fund that gives you offshore exposure. This unit trust tracks the MSCI World (DM) Equity Index which spans more than 1600 stocks across 23 developed markets. A feeder fund is a portfolio that, apart from a cash component, consists solely of participatory interests in a single portfolio of a collective investment scheme. The Satrix MSCI World Equity Index Feeder Fund invests in the dollar based Sanlam World Equity Tracker Fund listed on the Irish Stock Exchange.                    
                   
Read more about the fund here.                                                    

Click here to download the PDF version.

                

Data source: Satrix, Worldmapper, MSCI

                                                                        

               

 3. YOU WORRY ABOUT YOUR MONEY CONSTANTLY

This probably means you haven’t gone through the requisite financial planning process (preferably with a professional) to understand your personal balance sheet and income statement. You don’t know whether what you’re investing will be enough to meet your goals and you don’t have a grip on your day to day budget. Rip the lid off these numbers. It’ll be a great comfort to you once and for all to finally know where you and your money (and your future) stand.                    
                   
This exercise will also inform you of the answer to “what is your time horizon?” Knowing when you’re going to need money and for what purpose, allows you to know how much and for how long you need to be investing. It will also determine the risk you can tolerate because investing in the equity market requires a long time frame and an understanding of volatility.  Whilst saving for the proverbial “rainy day” is very virtuous, it often comes with a lack of motivation and staying power. If you actually have goals and a plan, this can all change.                    

                   

4. YOU HAVE NO IDEA WHAT YOU’VE INVESTED IN

You know you have some shares and a debit order for a retirement annuity every month. And you put some money into a tax-free savings account last year because you heard an ad on the radio. You’re not quite sure where you actually invested the money. You don’t know what the asset allocation (equities, bonds, cash etc) of your investments actually looks like or which funds you’ve invested in. If you are serious about making your money work for you, it is your duty to review and understand your investments. If this task seems daunting, it may be wise to consult a professional to assist you. Remember that your investments need to be aligned with your financial goals.                    
                   
All Satrix unit trust funds and ETFs are exposed to the capital markets which means that they all carry substantial risk. For those of you who may have a shorter time horizon or who don’t have a very aggressive risk appetite, you may want to consider multi asset class unit trust funds.                    
                   
SATRIX Low Equity Balanced Fund – this unit trust may appeal to a conservative investor who would like to earn an inflation beating return. The fund invests a maximum of 40% in equities. Great performance over the long run usually comes from equities, but so does a bumpy ride. This fund tries to limit the bumps, while growing your money over time. Read more about this fund here.                    
                   
SATRIX Balanced Index Fund – this unit trust would suit someone who can take on a bit more risk, a moderate to moderate aggressive investor. It holds 70% in equities and over time should give you a good return, but with less volatility than just being invested 100% in the stock market. Read more about this fund here.                    

          

Disclaimer
Satrix Managers (RF) (Pty) Ltd (Satrix) is an authorised Financial Services Provider and an approved Manager of Collective Investment Schemes (CIS) in Securities in terms of the Collective Investment Schemes Control Act, 45 of 2002. Satrix is the manager of the Satrix Unit Trust Scheme and the Satrix Collective Investment Scheme where the ETFs are listed on the Johannesburg Stock Exchange (JSE). CIS’s are generally medium to long term investments and the value of your investment may go down as well as up. Past performance is not necessarily a guide to future performance. CIS’s are traded at ruling prices and may engage in borrowing or scrip lending. A schedule of fees and charges and maximum commissions is available on request from the manager. There is no guarantee either with respect to the capital or the return of a portfolio. For both Unit Trusts and ETFs the investor essentially owns a “proportionate share” (in proportion to the participatory interest held in the fund) of the underlying investments held by the fund. With Unit Trusts, the investor holds participatory units issued by the fund while in the case of an ETF, the participatory interest, while issued by the fund, comprises a listed security traded on the stock exchange. ETF securities can be traded by any stockbroker on the stock exchange or via Investment Plans and online trading platforms. ETFs are index tracking funds, registered as a Collective Investment. ETFs may incur additional costs due to it being listed on the JSE.                
            

POSTED : 12 APRIL 2016

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