5 tips to making inroads into investing for your future

“There’s no point in a $50 million funeral or a $25 million divorce.”

One of the guidelines in the unofficial Goldman Sachs guide to New Year’s resolutions. Still, keeping a bit of money aside every month, subjecting it to compounding and then using it on a rainy day makes sense. In the same way as January makes for a horrid month at the gym, many people are thinking about financial resolutions for the new year. I thought of sharing a few basic tips on starting the process towards a greener financial future.

  • Do a quick analysis of your current financial standing

Jot down your current assets – your house, your car, pension, investments, cash on call, etc. Deduct the loan amounts outstanding on each so you’re left with a sense of exposure across real estate, cash, funds, equities and a picture of your total wealth. Ask yourself whether your asset allocation makes sense as an entire portfolio, or if you’re possibly too exposed to one asset class.

  • Build a mindset appropriate to your investment horizon

If you’re 30, you’ve got 30 years to save for the last 30 years of your life. You can afford to take more risk by having an allocation leaning towards equities, private companies and foreign currencies, than if you’re 50 and still paying off a bond. Although it is a marathon, try and fail when you’re young and the odds aren’t stacked against you.

  • Class yourself on a risk spectrum

Were you the guy at school who opportunistically stole sandwiches from your unsuspecting classmate, or the guy who listened attentively and brought his teacher an apple? You’ll know yourself well enough to establish how comfortable you are with taking risks and dealing with failure. Become familiar with this before deciding on an investment approach that makes you want to throw up if your portfolio takes a 10% dive.

  • Be prepared to be disciplined

Saving is one of those things that you tend to put off until next year. Go and visit a few old folks, or chat to your parents and their parents about friends who dont have money to live. The stories, together with those who retired early because of their financial discipline, will get you over the line of long term commitment.

  • Get your hands dirty

Michael Jordaan posted today that matrics should travel, learn another language, learn to code, start a small business and think for themselves. There’s no better place to start testing investment options by trying. When you’ve got skin in the game, the small print becomes a lot clearer!

Once you’ve thought about these, and perhaps shared a few more in the comments section, you’ll be in a position to address what you can afford to save on a monthly basis and how you might go about building a nest egg worth looking forward to.

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2014 – My Stock picks

The world continues to become a smaller place. Events on a national scale ripple though global markets and it becomes increasingly difficult to sort through the complexities that drive equity markets. At this point, the onset of Fed tapering has traders in a quandary – good economic news out of the US drives stocks down when in fact they should rise.

My SA focused, Rand hedge portfolio for 2013 returned 24% compared to the JSE Top 40’s 14.3%, which sounds great, but if you’ve bought dollars on 1 January at R8.45 and sold them today, you’d have made 22%. At least I kept up in dollar terms.

Nonetheless, my 12 month hold positions for next year are underpinned by the following:

  • The global economy will grow, for the first time in a few years, without any stimulus programme
  • Tapering in Feb/March will create a bottoming of shares – an opportunity to buy in at a discount
  • The Rand will lose another R2.00 to the dollar over 2014, so any SA stocks I own will need to have rand costs and dollar revenue
  • I’ll maintain a bias towards digital – the scope for global penetration, lack of competition and a move in advertising budgets to the online space will outstrip most other sectors
  • Africa offers high growth with limited avenues for equity participation

I’ve got a mix of 70% directly in stock, 30% in exchange traded funds which track the market. I’m roughly 50% US focused, 15% Africa and 35% South Africa. My direct holdings are shown below.

Some eventualities that I’m backing that will drive returns in this portfolio:

  • The ubiquitous search engine only has 6M Adwords accounts serving 1Bn people. The number of advertisers could quite feasibly double
  • Technology companies start offering financial services
  • Chinese and African middle class move from buying airtime instead of Coca Cola, to being able to spend discretionary income on games, apps and digital content
  • Netflix opens its doors to new markets
  • The world prospers a little – people continue to drink and smoke

As a few short term trades, I’ll buy platinum when the Fed announces tapering, I’ll hold a few Bitcoins, and keep Sterling and Euro in my wallet instead of Rands.

What’s your thinking?

Going solo – leave the rat race

I came across this great clip on the secret sauce of successfully leaving the corporate rat-race and setting your start-up in flight.

Too true!

Props to studiobotes.com

The benefits of trying your hand at something entrepreneurial

I attended a lecture by Laurie Dippenaar on Leadership recently. He relayed a few of the highlights he’d enjoyed on the journey of setting up Rand Merchant Bank, and ultimately, FirstRand. He talked about the fears and challenges that are common corridor talk for entrepreneurs – worrying about having money to keep the lights on, dealing with people and their quirks and managing clients that are bad for business.

His underlying theme for strong leadership is consciously developing an element of trust with all people you encounter and deal with. People will tend to favour doing business with you if they trust you, or be referred because you’ve had integrity in prior dealings with those in your network.

Laurie, like other famed South Africans such as Elon Musk, Mark Stuttleworth, Adrian Gore and Justin Stanford, all started out as entrepreneurs, with a little bit of risk capital and a lot of enthusiasm to make a difference in their industry.

As the typical corporate employees that we mostly are, we focus on becoming specialists in our roles, each of us a cog in the greater engine of the organisation. Jobs don’t engender experiences in wider business circumstances – understanding HR, accounting, marketing, sales or product development, unless we’re active in seeking that out.

The advent of technology allows us to dip a toe into being an entrepreneur these days on an experimental level. There is a critical mass on startups in South Africa that need help in the “specialised silos” of business that we can volunteer to help with. eCommerce software engines allow for us to set up virtual shops overnight, where the likes of Bean There Coffee and League of Beers have growth capacity to reach the stardom of Yuppiechef.

Throwing caution to the wind and trying out something entrepreneurial, where your own money and time is at risk will, at a minimum,

  • Broaden your thinking about commercial situations and decision making
  • Realise what you’re not good at, and what you’re passionate about
  • Grow your appetite for risk
  • Expose you to a new group of people with war-stories of running small businesses
  • At worst, grow your commercial insight for the benefit of your current employer

Moneyweb recently published this article on spending time with wealth-generating people, with particular focus on the now multi-millionaire who started Dropbox, Drew Houston. Read his tips on making money, without it costing you a cent.

You never know – you might find a passion for something that currently sits in the white-space of the industry and go on to be a respected and inspirational leader, through your experience as an entrepreneur.

Some local entrepreneurs that have survived the months of starvation, caffeine addiction and extreme anxiety and have inspired me through their stories are: Mike SharmanRetroviral; Ivan Kirstein – Richie Rich; David Philip – SilverApple Studios; Kirsty Sharman – SuperHeroStuff; Mike Wronski – Fuseware; Brenda Vos – Rovos Rail; Nick Petzer – Bayswater Capital; Tim James – Sustainable IT; Geoff Irons – GD Irons Construction; John Wolfaardt – Fruitworks; Lorraine Loots – 365PaintingsForAnts – and of course my Mom – Stanford Country Cottages

Cycling the Wines2Whales Adventure MTB ride

Just less than two weeks ago I took part in a 3 day mountain bike stage race from Somerset West to Onrus through some of the most incredible countryside South Africa has to offer. Having done the Sani2c earlier in the year, I can say without a doubt that mountain bike stage races are things that you have to put on your bucket list. It’s the ultimate combination of manly adventure, roughing and risking it and competing against yourself and a fiercely fast field. Throw in the fact that you do it with a solid riding partner, in my case Foxie (who spilt his breakfast all over the trail on day three and still sucked up the strength to keep our overall position), and good friends DC, Andrew and Kentt, it couldn’t have made for a better three days.

Just watch the highlights from the three days to see why you should buy yourself a soft-tail 29er this Christmas and get entered for next year..

How to make a million bucks in South Africa

Having worked for the last three years alongside some of the smartest and wealthiest people in the country through my time on the RMB Class Of programme, I’ve come to realise that it’s rather easy to become wealthy. It takes just two simple ingredients – patience and discipline.

There’s no need to think up the next perpetual energy machine, or a new widget that every person in China needs, or to go neglecting your family, friends, health and hobbies to get there. For the average South African, the mentality of “me-too,” if used correctly, is all you’ll need to become the next Joe with seven digits to your asset column. Here are my thoughts on how you can set the wealth wheel in motion.

Firstly, be disciplined about your money. Everyone has a particular kind of relationship with their cash – some, an anxious one, some a comfort one – but each person a different kind. Some worry about how much liquidity arrives every month and how to grow this, others worry about the little leaks in the dam wall that seem to drain each month’s income. Whichever you are, make a few promises to yourself about how you’ll save money first, and then spend what is necessary. Few people realise the opportunity cost of their cash, when it’s spent on a luxury item of clothing or a few unnecessary nik-naks, rather then earning interest, and interest on that interest, over a period of time to give you a life far differnt to how you’ll end up if you live hand-to-mouth. So if there’s one important first step, it’s to put aside a portion of cash each month, as soon as you get that salary notification SMS.

Property is one of the few asset classes that South Africans can finance with debt. The beauty of this is that the bank ultimately provides a platform for your asset to grow and compound, while you’re slowly chipping away at repaying the capital. If you had a R100,000.00 and put this into the stock market, government bonds or a cash deposit you’d earn between 3 and 20% per annum. That’s five to fifteen years to double your cash. If this was a deposit on a R1m house, and the property market kept up with inflation at around 5%, you’d be earning R50,000.00 in capital gain if you neglect interest and CGT. A far quicker way to grow that capital base. If you’re renting the property out, there’s even more upside for you.

The last little bit of insider info I can share is that because you’re in the rat race, the other rats are competing for similar returns, so you’ll need some way of differentiating yourself and giving yourself access to some upside event in the market that few other people could participate in. Considering your skills and network of contacts, look for a small business, investment club, or advisory role you might be able to fill, that you’d enjoy. If you’re backing the right business that adds value to the market, run by a passionate jockey that’s desperate to succeed, and you’re adding value in a way that you enjoy, your venture is sure to earn above-market returns.

With these simple steps, given time and the ability to wait for your work to bear fruit, you’ll be set up for great financial success and be able to live out your days with a house in Clifton.

Got any interesting thoughts yourself on how how to make a bar? Please share in the comments..

Adrian Gore – The attributes of success

I attended a talk given by Adrian Gore, Discovery Holdings CEO and founder, held at GIBS this last week. His talk focused on the commonalities of the attributes he feels are constituents of success. His measure of “success” doesn’t purely focus on the amassing of wealth for an individual, but can be applied to a company, a nation, or to an individual – to add such value to humanity that monetary reward will almost always play a part.

Gore proposes that success is not correlated to behaviours but rather to attitudes and characteristics, and the seven of these he discusses are as follows in some brief notes that were jotted down:

1.  Positivity

  • positivity actually makes you more rational
  • decisions couched in positivity have a far better impact, no matter the outcome
  • is the fundamental fuel for success
  • by correctly framing issues in your mind one tends to perpetuate the way things work out
  • The South African standard of living index does not support our implicit national negativity , however exceeding that of every other BRIC country

2. Set dreams and goals

  • set your own dreams and goals – but stretch yourself to aiming high with these
  • these are typically not about rationality, for even if you fail you’ll have gone further than if you hadn’t dreamed
  • vision helps you to look towards the future and these dreams

3. Sense of urgency – time is limited

  • depression stops people setting goals and acts to protect against dreams and vision, a phenomenon which has therefore survived evolution
  • we all have greatness within us, but believe that we haven’t used it up just yet. You need to be frantic about being great.
  • it is an irrational human condition that we think that we have endless time.  Time is not linear…when you’re younger, each year is perceived to be longer because it’s a larger percentage of the life you’ve lived
  • one’s energy levels drift lower each year, so start leaving a legacy when you’re young
  • one cannot sit around and wait for things to happen

4. Never stop learning

  • learn more about yourself; learn about your true potential
  • don’t be arrogant…you will never be at your pinnacle
  • ask the stupid, simple questions
  • knowledge is the antidote to years lived, and the ability to acquire of knowledge is exponential – the more knowledge you have the quicker it is to get more
  • leaving a legacy is a function of time and knowledge

5. Persistence – you can work harder than you think you can

  • if you’re not going to take the initiate to work towards greatness with all your might, someone else will
  • Tim Noakes’ governor rule – fatigue is less about physical tiredness than it is about the governor in your head.
  • incremental improvement is always possible

6. Innovation – no longer just a nice to have but a requirement

  • success is a differentiating from the mean, thus one must be innovative
  • starts with the end in mind
  • if Apple was built here the SA GDP per capita would be 25% higher
  • innovation created CDOs and the global crisis

7. Integrity and honesty

  • success in one’s personal and career life and the work involved to get there isn’t worth squandering through lack of integrity

Quite amazing insights, and certainly attributes well within the grasp and realisation of every man.

So I guess this begs the question – what are we waiting for?

What is your competitive advantage to business

Often heard as a topic of conversation near the water cooler is that of “competitive advantage.” Companies up in lights are lauded for their “differentiated offering” and run of the mill business fade into history for not developing one themselves.

My time at a very successful investment bank has underlined the realisation that competitive advantages are of such critical importance to businesses being successful. We analyse industries and companies until the wee hours of the night, and the champions of industry always share that one common denominator – a strong competitive advantage.

Bring to mind your last trip to the flea market and think about how average the experience was. You most probably walked the lines of stalls looking at heaps of similar products – wooden hippos and rip-off-brand t-shirts everywhere. In contrast, think about your favourite product or service on the web and how you’ll keep going back to Gmail or The Fancy because the product is engineered in such a way that nothing else out there can touch it.

So what tends to make for the key ingredients in a successful business differentiator. My sense is that it’s technology, people and innovation. If the business you’re engaging with, or want to work at, has a focus on these three things, you’re bound to be able to ride that wave of success. For example:

  • FNB’s investment in their technology platform allows them to deliver new and innovative products to customers quicker and more effectively than other retail banks;
  • Bain or McKinsey solve the problems of businessmen and -women that one would imagine think about their own business all day long but cant solve themselves. Their investment in bright people makes all the difference;
  • Innovative disruptions continually shake the market when Google releases their new glasses or Apple their latest version of the iPhone

So all good and well – these attributes can be sought out in an employer or supplier, but my question to you is how are you differentiating your skillset, experience and network to be the person that gets called when a dream-team is being assembled?

My take on the bank with the lowest fees

I have a gripe about all the chatter regarding the bank with the lowest fees.

Say, hypothetically, that you’ve been diagnosed with a severe but benign tumour in a part of your body that’s difficult to operate on – let’s say, in your brain. Which surgeon are you going to pick to perform your operation to remove the growth? The cheapest one? Or the best one? Now hold that thought.

Every bank has some system in place to manage their transactional banking. There’s an online component so that customers can interact with it through their phones or computers, and an offline component that deals with liquidity, risk management, settlements and reports. The best systems have the best capabilities (they can offer share transacting as well as prepaid airtime top-up), the best security (nobody likes their account cleaned out by hackers) and the best management tools, so that the staff behind the scenes can offer customers better lending rates, quicker quotes on home loans and offer products best suited to their customers.

Now, would you like the cheapest system, with the lowest level of functionality and lowest level of security?

Every bank also has staff, scattered across the country in branches and head offices who do what bankers do – deal with clients, decide on credit extensions, and take advantage of free Friday afternoons when they all close at 2pm or something ridiculous. But the best people cost money. The best people will more than likely tend to your query quicker, be better at understanding your personal circumstance, and probably offer better investment advice.

So I ask again.. Would you like a wet-behind the ears newbie and their team of dead wood dealing with your money and life’s savings every day? I didn’t think so.

There is a point of optimal efficiency, where smart people have invested correctly in technology, and the product, quality of service and related fees are at their best possible position. Some banks are doing this better than others, and it will likely ebb and flow as the years go by. But if you’re only worrying about fees – then please be happy for some relative of Og to come and collect your money with his grubby mits. Given the importance of money in your life today, and more importantly, into retirement, it’s advisable to pay for a bit of value.

Do you agree?

My thoughts on having done an Ironman 70.3

In January, I completed the Ironman 70.3 in East London. It’s take a few weeks to mentally and physically digest, but these are some of my thoughts and experiences on doing the race. I still cant quite encapsulate the event in words, because it’s far more than that, but it’s as much about the 25 weeks before the race that help make it what it is.

First up, it’s terrifying. So much so, that the fear will get you out of bed every morning at 4.45 to go and train and make your pulse race at 150 bpm when the start gun is about to go. The challenge of training, though, is that when you’re exercising at one discipline, you’re neglecting two others. That makes it terrifying and an anxiety. But nonetheless, a great way for you to realise your limits. You soon realise where your body cannot go any further – sometimes that’s as simple as not being able to run or cycle anymore, but also when you run out of patience with a friend or colleague, cant concentrate on your work, or find you’re so tired that you’ve got nothing to add to a conversation, even though it’s only 7pm.

It’s costly. It’s quite a commitment to buy all the necessary goods, from a racing bike, to enter the events, to a wetsuit, trisuit and all the other bits of paraphernalia one needs. But more so, it’s costly on your time and relationships. Your weekends are consumed by training and travelling to your training, sleeping and eating properly. In lieu of this, your relationships don’t get the time they need to be enjoyed. You’re also the laughing stock because you can only manage one beer at a party, and need to get out of dinner parties at 9 to go and sleep. But in this all, a real sense of clarity about your life emerges. In having a day that needs a lot more crammed into it, you become more focussed and efficient at work, more inclined to make the most of seeing a friend or family member, and cut out all the useless, wasteful time you used to have.

It puts your body and mind on the edge of their own precipices. During the last ten km’s of the run on race day, my leg muscles knew what to do, they’d done it hundreds of thousands of times before. But my body just wouldn’t let them. Or maybe it was my mind. But there was nothing more to give in that hour, and that’s one of the greatest feelings I’ve ever had.

During the race, I thought I’d never want to do another one again. But now, having gone through the range of emotions subsequent to it, I cant wait for January next year. I know how I’ll change my training, where I’ll push harder, and where I’ll take my foot off the gas. I guess that’s how your own progress and development works.

Have you ever thought about trying one? The backing music might make it seem a little easier to sign up ;)