Investing 2013

What a fantastic surprise we got in 2012! The JSE gave us 27% including dividends and the S&P close to it. I was hoping for 12% return on shares. The amazing thing I take away from 2012 is how wrong we all are in our expectations.

January 2012 people stormed into my office, begging me to sell all their shares and to buy Gold. The big thing back then was that the EU was going to collapse and that Gold was going to hit $2 500 at the end of 2012!

Gold returned 6%, Inflation was about 5.8%!!! Gold shares like AngloGold returned -25%!!!

So if you sold your JSE share portfolio in Jan 2012 for R1mil and bought AngloGold shares, your LOSS would have been R520 000!!! This is something that will take you a very long time to recover from, if ever.

It is because of these emotionally driven disaster choices that people suffer financially, and the worst thing is that they then blame Shares for their predicament and make the mistake of keeping their longer term funds in Cash because their investment confidence got shattered!

I am convinced that the BIGGEST mistake we can make is to tamper with a well diversified equity portfolio. If you invest in 2 or 3 of our most successful (based on 7-10 years past performance) EQUITY Fund managers like Coronation, Foord or Nedgroup, you need not worry because with ALL the ups and downs, you will receive a good return after 7-10 years!

The Second Biggest mistake we make is to not build a relationship with a qualified licensed IFA (Independent Financial Advisor). I can give you 2 reasons why you should do it:

1. If you are still young and accumulating investments for future retirement, the IFA can work out a plan that will give you precise information on how much you have to save, for how long and in what.This plan can be monitored every year to see how you are doing.
2. At some stage in your life you will have to start drawing money from your investments (retirement). At that stage the IFA will know you well enough, and you will trust him/her enough to split your portfolio between the short term cash and the longer term equity exposure.

Regarding investments for 2013 I list the assets in order of preference:

1. Developed countries Equity.
2. Emerging Market Equity including SA (The Rand might be rather strong so no currency profit).
3. Bonds are expensive and when interest rates turn up they will suffer, so avoid.
4. Listed Property is expensive, as it has been for the last decade and keeps surprising on the upside but I will avoid it.
5. Cash only for short term expenses, it is not an investment.

Good Luck.