Everyone’s worried about their finances right now, but it’s vital that you don’t cancel your insurance or default on your insurance premiums. This will not only put you in a difficult financial situation if something valuable is damaged or stolen, it’ll also affect your ability to get insurance, or any form of credit, in the future, as your credit score will be impaired. “It’s hugely risky to cancel your insurance, as a time of crisis is when you actually need insurance the most. And don’t just stop paying: Bad credit decisions can come back to haunt you later. But there are several things you can do to make sure you pay the lowest premium possible, especially during lockdown. Talk to your insurer now and make a plan in the short term, rather than suffering long term consequences,” says Wynand van Vuuren, partner of customer experience at King Price. Defaulting on your insurance premiums will see you being reported to the credit bureaux for non-payment, which will negatively affect your credit score. A credit score is a 3-digit number that helps lenders evaluate how safe or risky you are as a customer. It’s based on the information contained in your credit report, which is a history of all the loans and credit you’ve ever taken, and how you’ve paid them back, as well as how reliable you are with your other monthly payments. So why does your credit score affect your insurance premium? Insurance companies use a range of factors to assess your risk and determine the premium you will pay. For a car, these include the security measures where you park your car; the age, make and model of the car; your age and driving history; your accident and claims history – and your credit score. “You may not realise it, but your credit score is a powerful predictor of your financial behaviour. It shows lenders and financial institutions how likely you are to pay your bills and default on debts. As such, when it’s combined with other factors, it tells an insurer how risky you would be to take on as a client, and this risk will be reflected in your premium,” says Van Vuuren. According to insights and data company TransUnion, the biggest influence on your credit score is your account payment history – that is, how you manage your accounts and whether you make the monthly payments on time. To improve your credit score, focus on paying the full instalment of every bill on time, so you’re offsetting past negatives with more recent positives. It also helps to maintain a healthy mix of credit – store accounts, credit cards, a home loan, and service contracts such as cell phone accounts – to establish a good credit history. The bad news is that a negative credit score can take 2 years to fix. The good news is that it’s easy to obtain your credit report. You can download your credit report once a year, for free, from TransUnion. Source: FA News
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Global financial markets recovered some of their lost ground in April, with returns largely driven by record monetary and fiscal stimulus announced by many countries in response to the economic fallout from the Covid-19 pandemic. US GDP contracted by -4.8% during the first quarter of 2020 (its biggest contraction in 12 years), as the negative effects of measures taken to stem the spread of Covid-19 started to filter through to the world’s largest economy. US unemployment figures continued to climb higher in April, as 20 million workers filed unemployment claims in April (following the 10 million claims filed in March). Source: Morningstar South African Market Update The Governor of the South African Reserve Bank, Lesetja Kganyago, announced a reduction in the repo rate of 100 basis points from 5.25% to 4.25% (its lowest level since 1973) during April in response to the Covid-19 pandemic, which will provide additional relief to SA consumers and businesses after a similar move in March. President Cyril Ramaphosa announced a R500 billion economic support package in Phase 2 of government’s response to the Covid-19 pandemic. One of the most notable announcements was a R200 billion loan scheme to assist small and medium size businesses in paying out salaries and other expenses. Following the downgrade by Moody’s of South Africa’s sovereign credit rating to sub investment grade in March, both S&P and Fitch both downgraded their credit ratings for SA further into sub investment grade territory during April. Headline inflation remains well contained, with the year-on-year figure to the end of March 2020 slowing to 4.1%. The largest contribution to the lower inflation figure came from the petrol price decrease in March, which contributed more than 50% of the decrease from the headline inflation figure reported at the end of February. See below for a summary of the key market movements for the month of April:
• The JSE All Share Index (+14.0%) moved significantly higher during April, largely driven by strong performance from Sasol and gold and platinum counters. • All local equity sectors finished the month higher, with Resources (+23.0%), Financials (+11.9%) and Industrials (+9.6%) all ending the month with strong returns. • Listed property (+7.0%) also ended the month higher, however, the asset class remains the worst performing local asset class year-to-date. • Local bonds (+3.9%) finished the month higher, as lower interest rates and well contained inflation led to investors taking advantage of the attractive real yields on offer. • Cash delivered a stable return of +0.5% for the month. • All major developed equity markets ended the month higher, with the largest contribution to the strong returns coming from US equities. The MSCI World Index delivered a return of +11.0% for the month. • Emerging market equities also delivered strong returns for the month. The MSCI Emerging Markets Index delivered a return of +9.2% for the month. • All major equity markets ended the month in the black, with Germany’s FSE DAX (+9.1%), Japan’s Nikkei 225 (+7.8%), the UK’s FTSE 100 (+5.7%) and China’s Shanghai SE Composite (+4.6%) all delivering strong performance. • US equities ending the month significantly higher, with both the NASDAQ 100 (+15.2%) and the S&P 500 (+12.8%) rebounding strongly during the month. • In terms of commodities, all major commodities ended the month higher. Oil (+11.1%) recovered some of its significant lost ground since the start of the year, while Gold (+5.8%) and Platinum (+5.5%) also ended the month higher. • The rand was weaker against most major developed market currencies for the month. The rand depreciated against the pound sterling (-4.4%), the US dollar (-2.8%) and the euro (-2.6%) during the month. *All data is sourced from Morningstar Direct as at 30/04/2020. The performance of South African asset classes is quoted in rands and the performance of global asset classes is quoted in US dollars. You’ve heard the bad news and you’ve read the scary headlines. The COVID-19 pandemic is taking its toll on human lives, economic growth and financial markets. With businesses closed and jobs being lost, the big question is: what should I do (or not do) with my money and investments? To help you out, we’ve listed five pointers below. 1. Revisit your budget Many South Africans currently find themselves in unfamiliar territory, where their primary focus is firmly fixed on making sure that their day-to-day expenses are covered and that they stay out of the bottomless pit of debt. If this sounds familiar to you, you make want to take another look at your monthly budget and make sure you’re still living within your means. You’ll be surprised by how much money you could save by just making a few adjustments. In fact, you may even have money left over to invest. And if you don’t already have a budget set up, now’s as good a time as any to get started. 2. Set up an emergency fund If those news headlines have taught us anything, it’s that the future is never certain. Nobody knows what the ‘fates’ have in store for us – which is why a ‘Rainy Day’ fund is so important. Conventional wisdom has it that you should have enough money saved to cover your basic expenses for at least three months. That’s a lot to ask if you don’t have any savings at all… but setting aside even a small amount on a regular basis adds up over time. 3. Save… and invest Given the dire state of the markets, you may be tempted to cash in your investments and stash them in the bank. But there’s a reason why – in good times and in bad – the smart money isn’t on just keeping your money in cash. While cash may seem like a safe bet in the short term, history tells us that almost all other asset classes will outperform it over the medium to long term. Even in a bear market (actually, especially in a bear market!), there are good investment opportunities for those who are willing to set emotion aside. Have a look at our Past Performance Tool to find out more, or better still, try our Fund Selector tool see which Prudential fund best suits your investment goals. 4. Don’t disinvest If you're not forced to sell your investments to cover your day-to-day expenses, then it's a good idea to simply stay put. At a time when many inexperienced investors are tempted to cash in their investments, it’s worth highlighting that selling at the bottom of the market will only lock in your losses. Historically, it’s typically a better long-term approach to stay put, and stay invested. If you speak to your financial adviser, they might put the problem to you this way: “If the value of your house were to suddenly drop (say, because the property market was in a slump), would you immediately put your house up for sale?” Your answer would probably be “no”… and that’s exactly the point. By abandoning your investments now, you’ll not only lock in your losses, you’ll also limit your chances of recouping their value (and your money) when the market bounces back. 5. Beware of scams Weak economies tend to bring out the worst in people, and the COVID-19 pandemic has already produced its share of chancers, opportunists and fake news peddlers. Fraudsters often use the names of trusted and well-known institutions to try and trick people into believing that they’re legit. But if you’re offered a deal or investment that sounds too good to be true, be sensible and run it past your trusted financial adviser first. Or better still, visit the institution’s website and contact them directly. In times like these it’s important to not only make good financial decisions, but also to have your wits about you. To find out more about investing, contact Kevin email invest@daberistic.com tel: (011)658-1333 Source: Prudential Discovery Health has launched a new Covid-19 Benefit across its plans. It is called World Health Organization Global Outbreak Benefit. Discovery Health Medical Scheme (DHMS) is taking proactive steps to make sure its members who need it have the necessary cover for COVID-19. Overview From time to time, there are viruses or diseases that affect world health. These outbreaks are closely monitored by the World Health Organization (WHO) and are, depending on the severity and spread, declared as epidemics that place the global population's health at risk. We recognise the importance of being prepared for these public health emergencies. Through careful benefit design and in support of public health initiatives aimed at containing and mitigating the spread of such outbreak diseases, our members now have access to supportive benefits during the outbreak period. The outbreak is actively monitored by a dedicated team within Discovery Health that closely assesses the evolution and progression of such outbreaks. Having a timely and effective response to global epidemics help to improve the health outcomes for our members. This document explains the cover and support we provide to you when faced with a WHO-recognised epidemic. WHO Global Outbreak Benefit The WHO Global Outbreak Benefit is available to all members of Discovery Health Medical Scheme during a declared outbreak period. This benefit ensures members with a confirmed diagnosis have access to the out-of-hospital management and appropriate supportive treatment as long as they meet the Scheme's Benefit entry criteria. The WHO Global Outbreak Benefit provides cover for a defined basket of healthcare services related to any outbreak disease. How you are covered from the WHO Global Outbreak Benefit When you are covered? The WHO Global Outbreak Benefit is available for the WHO-recognised outbreak period. All healthcare services covered by this benefit are available for confirmed outbreak diseases, as confirmed by a test and subject to the Scheme's benefit entry criteria. This benefit, available on all plans, is covered by the Scheme for confirmed cases of outbreak diseases and does not affect your day-to-day benefits, where applicable. What you are covered for? Cover includes access to a defined basket of care that includes: • The diagnostic tests • Consultations (which can also include video call consultations) • Defined supportive medicine list. Use of the relevant networks as per chosen health plan will apply for healthcare services paid from the WHO Global Outbreak Benefit. More information is available in the following two documents: Guide to Global Emergency Benefit Frequently Asked Questions By Global investment strategist at Ninety One, Michael Power In a recent column in the Financial Times, historian Yuval Harari made the observation that emergencies ‘fast-forward historical processes’. The Covid-19 pandemic, he said, is doing exactly this. Rapid changes are taking place across all aspects of society. Countries, economies and people have been so disrupted that nothing is constant. ‘I think there is no normal any longer,’ said Michael Power, global investment strategist at Ninety One. ‘We are in such a fluid environment that there is nothing very much we can take for granted any more.’ Perhaps what is most profound about this, is how time frames are being condensed. ‘I’m not sure what long term is any longer,’ said Power. ‘Things that I thought were going to happen for instance by 2030 I think in many instances are going to happen by 2025, and even before. There is a concertinaing of many things at the moment, and the reality is that “long term” is something that is affecting portfolios now. ‘There are huge changes taking place across vast areas of business, politics and geography, and we have to get to grips with that.’ This is an acute challenge for asset allocators. They need to be extremely cognisant of their future allocations, because the future may be closer than they realise. Power emphasised two major trends that should be shaping decision-making. The first is that the shift of economic power to the east may now happen more quickly than previously thought; and the second is that the eurozone, and potentially the European Union itself, are increasingly fragile. Chinese wealth ‘We are fast-forwarding this process by which the west is going to see the centre of gravity move to the east,’ said Power. ‘I think that is going to happen in the next five years rather than the next 10. My prediction is that by 2023 China will be a larger economy in absolute terms than the US.’ This shift has been sped up by the massive economic impacts of the coronavirus. While every country has been affected, China is likely to revive itself more quickly for a significant reason. ‘What’s driving the admittedly muted recovery in China is the Chinese consumer,’ said Power. Consumers in the west will struggle to support the recovery of their own economies to the same extent. And this disparity is going to grow more pronounced. ‘What is going to happen in the next five years is that China is going to discover its 1.4 billion consumers, and they are going to become the drivers of the Chinese economy,’ said Power. This will happen at the same time that China is starting to match, and in many cases lead, the development of global technologies. ‘We’ve seen it start to happen with Huawei in cell phones, and it’s probably going to happen in things like aircraft,’ said Power. ‘The Chinese are going to start to move up the technology chain.’ Asset allocators need to consider what this means for their portfolios, particularly because this transition won’t be smooth. ‘In this process of change, there will be capital that will start to leave the west and move to the east, but it will do so quite hesitantly,’ said Power. ‘Some of it will go to a stepping stone between these two worlds, and that stepping stone looks like gold. ‘I think we have to watch this trend,’ he said. ‘Start understanding the opportunities to invest your capital beyond the old world, because the new world is going to come into focus much more quickly.’ European cracks The second major disruption that may be accelerated by the Covid-19 crisis is a serious challenge to the sustainability of the eurozone. ‘In the next five years I think the euro is in danger and possible the European Union itself,’ said Power. ‘That threat is going to come from the south.’ The southern European states are falling further behind their northern peers in economic terms and are increasingly reliant on financial support to sustain their viability within the European Union. Their vulnerability may become even more starkly apparent in just the next few months of summer. ‘Southern Europe earns well over 50% of its GDP from the tourism season,’ said Power. ‘It’s like having a single crop, and their crop is going to fail this year. They are going to get no income from tourism. ‘That is going to cause huge problems, not only for Italy, but Spain, and Greece and Portugal. Many of the issues that are facing the European Union are going to become very front-and-centre in the next four months.’ This may well lead to another country deciding to split away from the Union. ‘In the next five years its distinctly possible that we will see a second exit from the European Union, and that is probably going to be Italy,’ said Power. ‘Even before this, there were cracks evident, but those cracks are now gaping chasms.’ Source: Ninety One |
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