welcome to the just common sense all-new bold! · useful stuff gotta have it just common sense...

USEFUL STUFF

GOTTA HAVE IT

JUST COMMON SENSE

FINANCEIN PERSPECTIVE

AUTUMN 2011

WELCOME TO THE ALL-NEW BOLD!Full of information and intriguing ideas that

we hope will inspire you to do great things!

BOLD is also available on our website in

isiXhosa, isiZulu, Sesotho and Afrikaans.

ROUND THE DINNER TABLE

INSPIRATIONAL PEOPLE

FRIEND TO FRIEND

IN LOVE WITH PROPERTY

ASK THE EXPERTS

WORKING OUT THE NUMBERS

17 − 70

FIRST PREVIOUS 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 NEXT LAST

A FRESH POINT OF VIEW

HOW THE RICH GOT RICH

HOW THE RICH GOT RICH

Critics predicted an end to his success

when his conservative investing style

meant sitting out on the dotcom bull

market stampede. But the world’s

savviest investor’s time-tested strategy

proved yet successful again, and he had

the last laugh after the dotcom crash. His

simple investment principles have made

him arguably the most closely followed

and widely imitated investor in history. He

is also known for his dogged adherence

to the value investing philosophy and

also for his personal frugality despite his

immense wealth.

However, the majority of us aren’t

Warren Buffetts, and don’t have the

same legendary skills when it comes to

choosing the right investment. That’s why

Old Mutual has expert financial advisers

to help individuals assess their financial

needs and choose the most appropriate

investment solutions for them.

At the same time, Old Mutual Investment

Group’s 16 specialist boutiques have

the investment skills and experience

required to manage many different types

of investments, choosing the best-valued

assets for the long term, Warren-Buffett

style.

We recommend: The Warren Buffett Way: Investment Strategies of the

World’s Greatest Investor by Robert G. Hagstrom. By acclamation it’s the best

book written about Warren Buffett’s investment philosophy and techniques.

It details Buffett’s focus on brand strength, return on invested capital and

margin of safety.

Interested in reading more about Warren Buffett’s investment principles?

How the rich got rich: Warren Buffett

Warren Buffett is widely regarded as one of the most successful investment icons. He takes a simplified and long-term approach to investing, and cites his most important principle as understanding the business behind the stock.


It’s better to hang out with people better than you. Pick out associates whose behaviour is better than yours and you’ll drift in that direction.

“”


Pieter Hugo, MD of Old Mutual Unit Trusts, advises that to be successful, an

individual should employ these tried-and-tested investment principles:

Have a plan: The plan should determine your goals, current financial position,

planning horizon and risk profile. It is important to review it regularly with the

help of a licensed financial adviser, broker or corporate consultant.

Diversify your investments: A diversified portfolio will help to manage your risk. A

sound financial plan typically includes a balanced portfolio of investments (shares,

bonds, cash and property) spread across both local and international markets.

Take a holistic approach: In any diversified portfolio there will always be times

when one asset class outperforms another. Property may go up as shares come

down. It’s your combined portfolio’s total return over the longer term that

matters, not the performance of the underlying investments.

Think long term: It’s time in the market that counts, not timing the market. It

is far better to use time to your advantage than to try to time the market. The

sooner you can start investing, and the longer you can invest, the more likely you

are to make a healthy return – regardless of the ups and downs along the way.

Not just cash: Over the long term, cash is unlikely to deliver the returns needed

to outpace inflation. For the bulk of investors who have longer investment

horizons, a cash-only investment is unlikely to deliver an adequate return. It

needs to be supplemented with investments in other asset classes that offer

capital growth potential.

Ignore the daily ups and downs and invest regularly: By investing on a regular

basis over the longer term, you generally get the best return. If you are in the

market with the aim of building your long-term wealth, it is better to disregard

short-term performance fluctuations and to focus on your long-term goals.

1.

2.

3.

4.

5.

6.


17 − 70

S

In 17 − 70 we will deal with financial issues as they pertain to specific age groups. In this issue… the benefits of planning for retirement at a very young age!

17−70

You know how hard you have to prepare

for just about everything in life. You

prepare for exams and prepare for

meetings but have you ever thought

about preparing for your retirement?

You are fresh out of university and just

started out your career, taking your

first steps on the corporate ladder. You

are probably well aware that you have

to be financially prepared for when you

stop working one day. But you tend to

put it off to think about later… And yet

you often hear about how people often

fall short when they come to retirement.

Don’t let this happen to you.

Old Mutual’s new approach to retiring

well, PREtirement, is about planning and

realising that even the smallest steps in

the right direction can help you achieve

financial freedom when you retire. Simply

invest what you can afford, and let

compound growth do the hard work for

you. The sooner you invest and the more

you invest, the harder compound growth

will work for you.

The key is to start today.

Just R250 per month is enough to get

your Retirement Annuity started!

And this is how compound interest works:

Say you began investing at the age of 25 – and

invested R100 a month (with a built-in escalation

of 10% annually) – and, just for example, that

investment grew at 10% p.a. until you were 65

(a term of 40 years.)

Total premiums paid: R531 111.10

Fund value: R2 080 368.28

No wonder Einstein called compound interest

the 8th Wonder of the World!

PREtirement takes a fresh and easy approach to retirement

DID YOU KNOW?Old Mutual offers a range of solutions to fit your pre- and post-retirement needs,

no matter what age you are...

S

Here is some advice for investors who are starting a little later in

the game.

Say you started saving for retirement at a later stage, age 40. What

tools or advice is available to help you set aside enough “inflation-proof”

capital? And how does property compare to a managed retirement fund

in this regard?

As you don’t have that many years to go to retirement, it is important

to invest in assets that tend to give returns above inflation (e.g. shares

or property). The value of these can go up or down, but over a longer

period of time (i.e. more than 5 years) they should exceed inflation

(as history has shown us). It is generally recommended to invest in

a mixture of these asset classes as they don’t tend to go up or down

at the same time or with the same margin. A balance between assets

therefore could benefit you if, for example, share values go down for a

period of time.

Investing in an approved retirement fund adds the benefit of investing

smaller amounts into each asset class.

Investing in direct property can be beneficial, but requires significant

money. Property has given great returns over the last few years in

South Africa, but investing in a balanced fund can over time give similar

returns. It is important to remember that up to 15% of your income can

be deducted from tax if you invested in an in an approved retirement

fund. Another benefit is that your growth and income in an improved

retirement fund is not taxed either. These tax savings can be invaluable

realising the retirement you desire.


S

Working out the numbers

WORKING OUT THE NUMBERS

For more information on PREtirement planning go to www.pretirement.co.za

These wheels will show you the power of compound growth and other possible future investment scenarios and solutions.


S

ASK THE EXPERTS

Life insurance:Over the hill or just out of touch?

In order to get a better idea of which benefits you might need, why not take

a look at the benefits some happy GREENLIGHT customers have opted for.

The somewhat old-fashioned phrase of

“life insurance” is still what many people

have in their minds when they think about

personal cover. But there are modern,

innovative products that can offer you

much more than a payout if you die.

Much more importantly, they also pay out

if you live!

If you experienced a traumatic event like

a heart attack, for instance, or cancer, or

even a disabling accident… you need cover

that can replace your income if you can’t

work, pay for any gap left by your medical

cover… and help you make any unexpected

lifestyle changes. In short, cover that pays

what it promises – no excuses!

So how do you decide what you

need?

You need to consider that catering for your

needs is not an exact science. As your

future unfolds, your needs will change.

For starters, consider these commonly

used guidelines:

Consider your life cover first in order

to provide your dependants with an

income and funds to settle debt.

Now look at disability cover –

protecting your income for yourself

and your family.

Severe illnesses can strike suddenly

– and strike hard. So illness cover is

a very high-ranking priority too.

Consider a risk cover provider that puts

you first. GREENLIGHT is one such provider

and has a very specific philosophy, called

“Celebrate life.” Which, in short, means

that once you’ve taken care of all the

things you should do – starting with your

Personal Cover plan – you can get on with

the things you can do! And just like these

three steps, GREENLIGHT believes that

once you are covered, you’re free to enjoy

each and every day.

Visit oldmutual.co.za/greenlight to find

out more about GREENLIGHT Personal

and Business Cover.

HOUSEWIFE… OR HOUSEHUSBAND

Jana Williams is a 34-year-old housewife who has three children and a

husband who is working hard to establish a career. Jana also brings in a

little extra income by selling jewellery from home.

If something happened to stop Jana from working in the home the

family would need immediate help in terms of child care, shopping and

household management. If she were sick (even for a little while) they

simply wouldn’t be able to cope. If she died, her husband would need

permanent live-in childcare as well as domestic help as he would have to

work even harder to make up the income gap.

Jana needs:

1. Life Cover – Death Benefit and Final Expenses Benefit

2. Earning Ability Cover – Daily Tasks or Daily Tasks Income Benefit

3. Lifestyle Adjustment Cover – Severe Illness (Comprehensive) Benefit

4. Future Needs Cover – Future Cover Benefits (Core)

YOUNG AND SINGLE

Steve Thompson is a 25-year-old marketing graduate who lives alone

and works for one of the big retail stores. He rents his home and does a

lot of business travelling, plays sport, and gets away for a break every

chance he gets.

Steve is completely reliant on his income. If he can’t work he can’t play

(and even more importantly, wouldn’t be able to support himself).

Steve needs:

1. Life Cover – Final Expenses Benefit

2. Earning Ability Cover – Temporary Income Benefit and

Comprehensive Disability Benefit

3. Lifestyle Adjustment Cover – Severe Illness (Core) Benefit and

Retrenchment Benefit

4. Future Needs Cover – Future Cover (Comprehensive Benefit).

In addition, as Steve is often away, he should call GREENLIGHT CARE 4U

to link up to ADT.

PARTNERED/MARRIED – NO KIDS

Pumie and Sipho Kamagu are a young couple who both work as

teachers. They are getting married soon and have plans to buy a home.

Pumie and Sipho are making future plans and the input of a good

financial planner here is critical. They have a lot of goals and need to

separate them into short-term, medium-term and long-term. They also

need to draw up a marriage contract before they get married.

Pumie and Sipho need:


2. Earning Ability Cover – Comprehensive Disability Benefit

3. Lifestyle Adjustment Cover – Severe Illness (Comprehensive) Benefit

4. Future Needs Cover – Premium Protection and Future Cover Benefits

In addition, they could call GREENLIGHT CARE 4U to connect with a

legal adviser.

MARRIED/PARTNERED WITH CHILDREN – OWN BUSINESS

Tanita and David April are married and have two children – aged seven

and ten. Tanita works as a secretary and David has his own hardware

store (Tanita helps in the evenings with the admin work).

With children to educate and a family to provide for – as well as a

business to run – these two have their hands full and can’t afford any

risk. They are doing their best to reduce debt and to pay off their home.

Tanita and David need:

1. Life Cover – Death Benefit, Accidental Death Benefit and Final

Expenses Benefit

2. Earning Ability Cover – Occupational Disability (Own) Income Benefit

3. Lifestyle Adjustment Cover – Extensive Illness Benefit

4. Future Needs Cover – Premium Protection and Future Cover Benefits

5. Business Cover – Business Contingency Cover and Business

Overheads Replacer Cover

In addition, as David’s vehicle is essential to his business, they should call

GREENLIGHT CARE 4U to find out more about Tracker vehicle tracking.

MARRIED/PARTNERED – NO CHILDREN IN THE HOUSE

Alan Jones and Sharmila Singh are in their late forties and are both

divorced. They each have grown-up children who are no longer

dependent. They both work and are at the peak of their careers, earning

good income. They are paying a joint bond.

Alan and Sharmila have commitments to extended families but are

putting any spare cash into bulking up their retirement planning with

hopes of a year-long round-the-world trip.

Alan and Sharmila need:


2. Earning Ability Cover – Comprehensive Disability Benefit


4. Future Needs Cover – Premium Protection Benefit

As they are also looking at buying a second home to produce additional

income, Alan and Sharmila should call GREENLIGHT CARE 4U for legal

advice around a lease agreement.

RETIRED – PARTNERED OR LIVING ALONE

Marita van Wyk and Helene Brown are friends and neighbours. Both are

widowed and both have retired. They are planning to sell their houses

and pool their resources by buying a shared home outright.

Marita and Helene both need:


2. Life Cover – Final Expenses Benefit

Most importantly, they need to contact GREENLIGHT CARE 4U to link up

with security experts to make their new home as safe as possible.


IN LOVE WITH PROPERTY

S

top tips for property investors

“I have 7 pieces of advice

for people contemplating

property as an investment,

all of which have been tried

and tested in the market and

in my own career.

”

Accept that property is always a long-

term investment with ups and downs.

If you are out for a quick buck, you

will not find it in property.

Do not rush this process: avoid the temptation of buying many

highly-bonded properties. Rather buy one and gear it correctly

before you move on to the next purchase. Later, as your income

increases, it may be possible to buy more than one property at

a time.

Diversify your portfolio. Try to invest in

both freehold and sectional title residential

property, as well as small commercial and

industrial units. Try also to avoid being

in one area. The markets fluctuate:

if you are spread wide this will

cushion the rises and falls.

Accept that your own home is

part of your portfolio. Too often,

as salaries increase, so does the

desire for a bigger and better home,

resulting in huge bond repayments.

Rather have a moderate home and

save by having a small bond here and

use the spare cash to buy elsewhere where

you will earn rent.

Unless you face financial disaster, do not sell. The ancillary costs

of buying and selling are high. You will have capital gains tax,

agent’s fees, transfer and conveyancers’ fees – all of which will

eat into your profit.

Focus on income rather than capital growth. The more

cash you can actually collect monthly, the better your

chances will be of buying elsewhere. Focus on the cash

and the capital growth will look after itself.

Set yourself the goal of building up a property

portfolio which you expand steadily. Do not sell

your investment property, even to buy another.

1.

3.

6.

7. 2.

75.

by Tony Clarke

Become aproperty magnate

overnight

For most, the first (and only) investment

in property is buying a home, but to

become a true property magnate you

need to invest in commercial property too.

This means putting some “eggs” into

retail (shopping centres and hotels),

industrial (warehouses and industrial

parks) and office blocks. Becoming a

property owner on this scale requires

millions of rand… but there are ways

of doing it without having to sell the

family silver.

1. Buy property shares. Major

property companies, who own large

commercial property portfolios, are

listed on the JSE. By buying their

shares you are effectively buying into

all the properties they own. When you

buy Growthpoint shares, for example,

you get your stake in, among others,

Pretoria’s Brooklyn Mall – and

soon you could be adding the V&A

Waterfront to your portfolio!

2. Or you can invest in property unit

trust and you will not only be

investing in a range of different

listed property companies, but you

have a professional property analyst

researching and selecting these

companies for you too.

For those who don’t already have a share

portfolio, unit trusts may be the simpler

investment route, as their minimum

investment amount is R500 a month.

We’ve all heard the mantra “don’t put all your eggs in one basket”, but the dilemma many of us face is how to apply this to the property market.

WHAT’S THE BIG APPEAL?Property’s investment appeal is mainly due to the stable, growing income

it provides (paid as dividends to shareholders), plus the possibility that the

value of the property may go up over time. Income is mainly generated by

rentals, based on long-term lease agreements. A long-term lease means an

ongoing, steady income and tenants are unlikely to hand in notice during

economic downturns.

For more information on investing in a property unit trust,

visit www.omut.co.za or call 0860 234 234.


FRIEND TO A FRIEND

S

A few things to keep in mind for successful investing in 2011

With South African interests

rates sitting at their lowest in

36 years and the uncertain

economic conditions around

the world, it is important

to remember a few key

investment principles...

The first being diversification, or,

not putting all of your eggs in

one basket. The second equally

important principle is to maintain a

long-term perspective, as too often

we are mislead by the impulses

associated with the “normal” ups

and downs of the markets.

“

”

“For those with jobs, we have a generally positive outlook for 2011,

says Peter Brooke, Head of Macro Strategy Investments (MSI) at

Old Mutual Investment Group SA (OMIGSA) who goes on to say

that they anticipate that interest rates will remain stable and that

we should see an increase in economic growth.

One caution however is that investors looking for a regular income

may find the going tough. This is the result of the “safer options”

like cash, which are often favoured by investors, offering lower

returns than in previous years. One solution is to spread your

investments into diversified solutions. Ask your financial adviser or

broker about solutions that are less dependent on interest rates to

overcome this.

As always though, it is important to assess your risk profile before

any investment decision so that you and your adviser can make a

more informed choice.

And lastly, our experts have placed particular emphasis on active

management, which basically means choosing a fund manager

who is always working to get the best return in changing market

conditions. And with various OMIGSA fund managers standing by,

why not make use of an expert to ensure that your investment is

working as hard as you are this year.

If you require a steady income this year and/or have most of your savings tied up in cash investments like money

market funds, it would be wise to try and save more and withdraw less. This may seem obvious but a little extra saved

here and there will help combat the fact that these funds are receiving a lower yield than in years gone by.

That said, if you can tolerate a bit more risk there are more diversified options available to you. Such as the Old

Mutual Real Income Fund which invests across cash, bonds, listed property and equities. As always it is advisable to

chat to your financial adviser about having them actively manage this fund for you.

Can you tolerate a slight risk on your investment? You might want to consider a balanced fund. These are diversified

funds and due to their exposure to growth assets proved popular in 2010. A long-term approach, coupled with

investment in such a fund could see healthy rewards with limited risk.

Depending on your situation and your investment preferences you may be happy to take more risks with the aim to

make a higher long-term return. With this in mind you may want to choose more aggressive funds that focus

on precisely that – such as the Old Mutual Flexible Fund. This fund takes full advantage of a diversified

asset holding which means that the “ups and downs” of the market will be felt considerably more than

those lower-risk funds. However, their higher exposure does mean that they often offer the best long-

term returns.

Low Risk

ModerateRisk

Higher Risk

The outlook for your risk profile:


INSPIRATIONAL PEOPLE

S

Gareth Cotten is a man with a mission – to enable success

through entrepreneurship and financial education.

He hit the ground running and started his entrepreneurial journey

at the age of 12, selling black bags in his neighbourhood. At

university he started a successful limousine company, with just one

car. And he now has a string of businesses under his guiding hand.

What drives him? “Personally, I want

to build a legacy – an empire – but

one that transcends what I can do

as an individual. I want to be an

inspiration to other aspirant financiers

and entrepreneurs out there – to show

them that anything is possible.”

Some advice for budding

entrepreneurs… above all, watch your

cash and your finances!

Try not to offer too much credit and

never be afraid to ask to get paid.

Know your business needs – and be

sure you have tailored your specific

budget accordingly. (A freelancer

at home, for instance, will have

completely different needs to a factory

with many workers.)

Estimate your income – by working

out how many products or how many

hours or days of your services you

typically sell.

Calculate expenses – fixed expenses

that you pay every month, and

which don’t change from month

to month (like salaries, bond

payments, insurance fees); variable

expenses that you pay regularly

but that can vary each month (like

utilities, transport costs, stationery,

marketing). And don’t forget yearly

expenses (like annual insurance) that

you should divide by 12 to get to a

monthly overview.

Review and adjust your finances on a

regular basis – once per quarter is a

good starting point.

Gareth Cotten is a successful

entrepreneur who runs his own

financial coaching practice and is the

convener of the UCT Basics of Financial

Management course as well as the

Start and Manage a Small Business

course, which is run in conjunction

with Getsmarter. He is also a regular

blogger on Moneyweb.

Go to http://www.ombold.co.za/contact-us/ and tell us who you think is an

inspirational South African and we’ll interview them so as to share their story

with all of our readers.

South Africa is full of inspirational people – in sport, in

business, in arts and theatre... In every issue we look at

one such person and find out what makes them tick... in

this issue, meet Gareth Cotten.

ROUND THE DINNER TABLE

S

A SMOOTH RIDEWe all know that investing or saving money is key to building wealth and achieving the goals we have set in life. But there are so many investment and savings products out there, so where do we start?


Ok, let’s say that your goal is

to grow your savings. But you

don’t want to take unnecessary

risks. Or perhaps you don’t mind

a bit of risk but are worried that

you will panic if the markets are

down. (Fear and greed are the two

biggest problems in meeting your

investment goals.)

The answer may be a smoothed

fund. Smoothed funds let you

sleep easy because they protect

you from the usual ups and downs

of the markets – which means you

are less likely to stress and more

likely to achieve your goals. And

you’ll still make a return. In other

words, a best-of-both solution that

gives you stability and growth.

This is done by retaining some of the

returns during good times so as to

soften the blow during bad times.

Smoothed funds are an excellent

way to achieve your investment

goals without the worry usually

associated with investing and

they provide good risk-adjusted

returns. They allow you to benefit

from the potential of growth assets

such as equities and property, but

with significantly lower risk than is

normally associated with investing

in these asset classes.

Incidentally Old Mutual’s smoothed

funds have, on average, exceeded

inflation by between 4% and 6% per

annum since inception in 1984. An

amazing result and a sure fire way

to get your investment off to a great

(and safe) start!

MARKET RELATED RA

SMOOTHED BONUS RA

SA INFLATION


JUST COMMON SENSE

S

Shop smart

15%

Smart shopping can earn

you as good a return as

clever market investing.

For instance, if you need

to buy a new car for

R200 000, saving 15%

on that car purchase is

worth more than earning

15% on a R200 000

investment, since your

investments are taxed

and your savings are not.

Then you can invest

that saving and earn

the return again.

The all-new Flip Ultra HD video camera.

The all-new Flip UltraHD video camera,

now with image stabilisation and a

new slimmer design, combines Flip

Video’s signature shoot-and-share

simplicity with better-than-ever HD.

Simply power on and press record

to start capturing up to two hours

of incredible HD video. When you’re

done recording, just connect the

flip-out USB arm to a PC or Mac and

use pre-loaded FlipShare software to

organise, edit and share your videos.

The new UltraHD also works with

Designed for Flip products, a new

expanded accessory line from Flip

Video and partner companies.

Gotta have it!

WIN ONE NOW! http://www.ombold.co.za/competition

C O M P E T I T I O N


S

Useful stuff

USEFUL STUFF

Do you want to update your email address? View your portfolio?Go to MyPortfolio where you can register for our free and secure online service. You can view your entire Old Mutual portfolio at any time and update your personal details at no charge to you. To register, go to www.myportfolio.co.za Do you want to find out more about our products?Our product and service solutions take into account what our customers need and deliver this through our collective skills, years of experience and our value-driven people. You can learn more about our offerings at www.oldmutual.co.za/personal.aspx Do you want to comment on any of the articles in BOLD?We value your opinion and suggestions for future issues. Please send your feedback to BOLD by visiting [email protected]

welcome to the just common sense all-new bold! · useful stuff gotta have it just common sense...

Documents