Characteristics of a Canny Investor – Part 1

By making the most of your income and implementing some savvy financial thinking even an ordinary salary earner can grow an impressive portfolio of assets. Investment success is primarily due to behaviour – not luck. As you will probably know, one of the mature investment perspectives reminds us that it’s not so much about timing the markets as much as it’s about time in the markets.

Let’s look at some of the behavioural traits of a shrewd investor:

They don’t worry about keeping up appearances
Wealth is what is left after you have expended your income. There is no point in seeing yourself as a smart investor if you don’t leave yourself anything to invest with at the end of every month. If you worry what people will think about the car you drive or the house you live in perhaps you need to rethink your priorities.

They clearly define their investment objectives
Investment is not a one-trick pony; investments need to be sorted according to objective and managed accordingly. We all have different goals with different time horizons, but smart investors know that different timelines mean different asset allocations and tax implications.

They know the difference between a trend and a classic
We are all driven by either fear or greed to some proportion. If you are chasing better returns on a hot tip or folding out of fearsome unknowns, and find yourself making numerous fund switches in the year, you may need to take a step back and decide which of these factors are driving your investment decisions.

Is your portfolio diverse enough to ward off your fears and focused enough to reach your investment objectives on time? If not, let’s take a look and get you on the right track.

Don’t go crackers

For most of us, November started off with a bang! But unfortunately remembering the redemption from explosive chaos does little to help us manage our time, stress, skills and finances over November and December. It’s like we just go from one event to the next, our limited weekends disappearing under the demands of a myriad of social events – all costing us ‘a little here and a little there’.

Before we know it, we look at our bank balance and somehow our budget figures seem to be quite different to the reality – this can drive us crackers!

Here are some financial planning tips for the next 54 days…

Make a calendar with budgets: It’s easy to assume you’ll have enough money when you’re only spending a few hundred here, and a few hundred there. But when they all add up, you’ll find that what you thought would be a couple of hundred bucks, turns into a grand or two.
Itemise all the events you have to attend and put in an estimate cost for each one. It’s okay if you go over, this is simply to help you understand where your money will be going in the next 7 weeks so that you don’t have an unhappy surprise!
Keep & capture your slips: Keeping your slips will help you check how accurate your budget calendar has been and will enable you to make decisions about the next event as to how much you should or shouldn’t curtail your spending. Knowing where your money is going empowers you to not spin into a panic when it’s suddenly less than you thought. Also – if you have extra left over, you’re able to enjoy some more guilt-free luxuries over this festive period!
Use cash instead of cards: If you budget R300 to spend at an event, and you have it in your pocket in cash, you’re far less likely to overspend. But if you simply swipe your card… it’s way easier to add on and extra R50 without even ‘feeling’ it.

Part of having me as your financial advisor, is that I’m here to help you plan and manage how you earn, save and spend your financial resources. If you feel like you’re going crackers… just drop me an email and let’s hook up!

When it comes to the rand – local is lekker

Have you ever wondered what causes the rise and drop in commodity prices? While there are several factors at play, the most significant cause is the fluctuating value of a country’s currency.

We’ve seen this happen with our own rand in the past few months as our currency has tumbled and gained momentary reprieves, so has the price of certain commodities.

As things currently stand our currency is doing better than it was in January of this year, but with the ominous threat of ‘junk status’ around the corner we can’t be sure what the future holds – and the recent political instability poses some unknowns. However… if the political decisions move in a constructive democratic direction, our Rand will strengthen.

So what causes a currency’s value to fluctuate?

There are quite a few factors at play. These are just a few of them:

Trade balance is one of the main factors. The trade balance helps to understand the strength of a country’s economy in relation to other countries. This is based on the calculation of a country’s exports minus its imports. When a country’s imports exceed its exports, the subsequent negative number is called a trade deficit. When the opposite happens, a country has a trade surplus.
Another factor is the political climate of a country. Political stability, especially in emerging economies is very important. But not just in emerging economies – look at what happened in the UK in the wake of Brexit. A political decision to leave the EU ended up having huge ramifications on the pound.
Inflation also plays a part. If your inflation rate is very high, then the value of your currency is going to be eroded. South Africa’s inflation rate is relatively high compared to the US.

Countries like South Africa operate a flexible exchange rate system, which means the value of the rand is determined by the market forces of supply and demand. In some other countries, like the United Arab Emirates, they have fixed exchange rates. Such countries, mainly oil-producing countries and ones with small populations, have very stable and predictable economies.

The strength or weakness of a currency always reflects on the prices of goods.

If commodities are imported for manufacturing processes, then the cost of finished products will be significantly higher in a country with a weaker currency. However, if the country is producing more raw materials and goods locally, there’s a better chance of keeping prices stable and inflation low.

The moral of the story from this blog…? Local is lekker!

The power of positivity and a good plan

Have you ever told yourself, “When I have more money, I’ll be happier”? How about, “I’ll never be able to pay off this debt”? These sort of toxic money thoughts are holding you back from financial success – and happiness! A good financial plan needs to be attainable and measurable, those expressions are neither.

The first step to a financial plan is both the hardest and the easiest – it’s the starting point. The point where you measure how deep you are so that you can calculate what you need to do to get where you want to be. Measuring your budget is usually a huge relief for most people, your finances are no longer a mystical figure floating in the ether, you have defined an attainable and measurable goal.

You need to rescript your brain into thinking positive and actionable thoughts. Here are some tips to help you along your way:

Get good advice
Getting good advice and being reminded that what we want to achieve IS attainable does wonders for an attitude of success. However, you will also need to keep your end-goal in mind.

A good way to do this is to pick out a positive phrase that acts as a sort of rule-of-thumb. For example, “Is this [potential purchase] better than a family vacation / new car / bigger apartment?”

Don’t Rush
One study showed that the farther away a goal seems, and the less sure we are about when it will happen, the more likely we are to give up. Consistency is key.

Use numbers and dates to measure WHEN you want to achieve your goals by. And work out some smaller, short-term goals along the way that will reap quicker results. Paying off debts or saving a certain amount, for example, can leave you with a great feeling of pride and accomplishment. This increases the likelihood of you keeping up your good financial habits.

Dig in your heels
Not next week. Not when you get a raise. Not next year. Get started today – and don’t let up!

Need some good advice? That’s why I’m here. Let’s get in touch!

South Africans lack confidence when it comes to finances

Most South African consumers feel challenged by their finances, with relatively few saying that they are highly successful at sticking to their financial goals or are knowledgeable about financial matters.

This was revealed when the Financial Planning Institute of Southern Africa (FPI) conducted a nationwide survey, in conjunction with the Financial Planning Standards Board (FPSB) and a global research firm (GfK), to determine South African citizen’s financial attitude compared to that of the average global citizen.

Both primary and shared household financial decision-makers were surveyed, 19,000 participants from 19 countries around the world, the results revealed the following key findings with regards to South Africa:

Consumers have moderate to low confidence when it comes to their finances.
Only 27% feel strongly confident when it comes to their “financial know-how”, or feel highly successful about sticking to their financial strategies. While 38% of the respondents were strongly confident that they will achieve their financial goals. These figures are higher than their respective global averages, but still aren’t promising.

Home ownership and support for loved ones are top financial priorities.
Home ownership and providing financial support for loved ones were the top financial priorities of South Africans. Other predominant priorities included being free of major debt, retiring in their desired lifestyle and managing finances to achieve life goals.

Financial planning services help to get on track financially.
South African consumers stated that the most helpful financial advice services they received were for retirement planning, budgeting, cash flow, debt management and investment planning.

Most consumers think financial planning should be regulated.
While 43% of respondents in South Africa are unsure whether financial planning is regulated (vs. 41% globally), 67% believe it’s important for financial planning to be regulated, compared to 79% globally.

Trustworthiness is the biggest issue when working with financial professionals.
87% of South African respondents believe that trustworthiness is the biggest barrier when it comes to working with a financial planner. Surprisingly, 70% said they don’t know whom to trust when it comes to financial planning even though they saw it as an important consideration.

Working with a CFP® professional helps consumers feel more knowledgeable about financial matters.
In South Africa, 37% of consumers who work with a CFP® professional report feeling strongly confident in their financial know-how. 29% of consumers who work with any financial professional feel this confident and only 25% who don’t work with any financial professional feel this confident.

It is easy to lack confidence when you don’t feel that you have the “financial know-how”. It is also easy to be overconfident. What it comes down to is not only financial knowledge, but understanding - that’s what I’m here for. I will take you through the necessary processes to formulate achievable financial goals and make you feel financially confident again!

Retail Distribution Review – Prepare for advice fees

For the first time in South Africa, financial advice is set to become a billable service. Known as the Retail Distribution Review (RDR), the first phase will be implemented later this year (2016), introducing some significant changes for both consumers and financial advisors alike.

As with all change, some sound preparation and a positive outlook will make for a smoother adjustment. One of the main changes in mindset is to accept that making direct payment for financial advice is fast becoming a reality.

RDR forms part of the Financial Services Board’s (FSB) framework that seeks to ensure fair outcomes to customers and tries to minimise potential conflicts between the interests of customers, product providers and advisors.

It is important for consumers to be aware that charging direct payment will be in place of commission based fees, which many consumers don’t generally think of as payment for advice.

Consumers are likely to face various different methods of charging by advisors. They could be billed at an hourly rate, just as they are billed when they consult a lawyer or a medical professional. Alternatively, they could be charged per consultation session or be billed a fee that is linked as a percentage to the size of the investment, similarly to the way a real estate agent would operate.

Customers pay for an advisor’s time, trust and relationship and quantifying these essential elements is found in every point of contact between myself and you - this is partly why I manage a website and newsletter that are dedicated to staying in touch with you.

We will all need to understand that fees are just a different way of paying for all that myself and my team offers. The FSB believes that the RDR will form a win-win situation for all parties involved.

Another 5 Financial Reflections for 2016

Looking forward to another year of financial success means embracing monetary mistakes of the past. More importantly, you need to be honest with yourself about where you currently are and where you want to be.

Here are another 5 Financial Reflections from 2015, for 2016:

Don’t let yourself be pressured into buying designer goods
Branding is such a huge part of the modern consumer society, yet there are generic products that deliver exactly the same level of quality. Buying high-ticket items might make you feel good about yourself in the short term, but in the long run your frugality makes more sense.

Learn to say you’re broke when you are
There is no shame in admitting this, especially when you consider how many people are living above their financial comfort level on credit. If your friends want to go to an expensive restaurant, don’t be afraid to suggest a bring-and-braai at your place rather; or delay the excursion until you have sufficient cash flow available.

Make the most of what you’ve got
Scavenge your wardrobe, some of the clothes that you haven’t been wearing are probably still in good nick. Check to see what you have before rushing off and buying new stuff. Fix things that are broken, reupholster, add a fresh coat of paint, and if all else fails look for second-hand bargains.

We live in a throw-away culture, avoid ostentatious display and appreciate the small things in life.

Be honest with yourself about wasting money
You can easily lose hundreds of rands on buying coffee every morning, going to convenience stores regularly and not eating the food in your fridge before it goes off. These are avoidable expenses that don’t need to be completely eradicated but can definitely be reduced.

By lowering your costs on daily commutes, meals, conveniences and personal luxuries you could quickly accrue a sizeable emergency fund.

Only use credit for emergencies
First, you need to consider what you define as an emergency. A malfunctioning gearbox, a burst water heater, a sudden visit to the doctor’s office. Once you start buying everyday items, such as groceries, on credit there should be warning lights going off in your head. Don’t think of credit card limits and overdraft limits as your money, it’s the bank's money that you’re using and it’s best not to forget it.

Turn your reflections into resolutions and forge a firm financial future for 2016.

In need of financial advice? I can help you out. Let’s get in touch!

Source: fin24