You’re looking for somewhere to invest. You have decided what types of collective investments you want to be in (which are appropriate to your circumstances), and must now decide on asset managers that you believe will do the best job for you. This is not a decision to be taken lightly, and an experienced, independent financial adviser would help you enormously. Two investment experts, Prasheen Singh, a director and consultant at investment consultancy RisCura, and Rory Maguire, the managing director of British investment consultancy Fundhouse, offer the following advice. (For clarity, the unit trust management company is referred to as the “asset manager” and the person managing the fund the “fund manager”.) 1. Do your research Singh says, given the wealth of information available today, you can do your own research. “Visit the asset managers’ websites and compare the fund fact sheets (or ‘minimum disclosure documents’) of the funds you’re considering. Ensure you understand the risk profile of the portfolio and the mix of asset classes.” Also research the company, fund manager and fund on websites apart from the company’s own to get a balanced picture. 2. Find a company you can trust Speaking at the recent Allan Gray Investment Summit, Maguire says: “Asset managers are stewards of your capital. It’s important that they understand that the money they manage is yours – there must be trust.” There are a number of things you can check for: The business structure must allow for a long-term view, without shareholders pressurising the company to chase short-term earnings. Privately owned companies and family- or staff-owned companies tend to do better in this respect, Maguire says. Be cautious of large funds and companies with many funds. “Asset managers get paid on the size of assets that they manage. A large fund can constrain a manager by being less liquid and less able to access smaller companies,” he says. “So look out for asset managers with limited capacity. It’s frustrating when an asset manager closes a fund to new investment. As hard as that is, it is telling you that they are putting their profits second to your returns.” There must be honesty and transparency. “Look for honesty, clarity, someone who admits mistakes. Avoid managers who are obfuscating and put catch-phrases and jargon in front of you to throw you off the scent,” Maguire says. Singh agrees: “Good fund managers should be able to explain their approach and how they intend to achieve their objectives in a manner that makes sense, even to a novice investor.” Fund managers who have their own money in their funds have a higher success rate than those who don’t, Maguire says. “They are going to care more and try harder. They have to eat their own cooking.” 3. Look for good-quality people Maguire says there must be consistency in how the fund is managed, and this comes through a stable, professional team. The key things to look for are: Passion. Experience. Differences of opinion. “Look out for companies that may be employing similarly-minded people. You get better answers through disagreements and proper debate,” Maguire says. The quality of the people behind the scenes. Employer of choice. “It’s a poor indicator if a company is losing people to its competitors. You want to be attracting good people and retaining them for fairly long periods,” Maguire says. Temperament. “Managers that add value to your portfolio are those that take different views to the market. But to do that requires the right temperament, which is a very hard thing to pinpoint. However, negative temperament is quite easy to spot. When you get defensive, ego-based answers to performance dips, be careful.” 4. The investment process must be consistent Asset managers employ different investment styles: some focus on value (assets at below-average prices), others more on quality (how well a company is run, its profitability, and its prospects), and others on growth (young, progressive companies with the potential to grow exponentially). Whatever the style, the company must be consistent in its investment process, which should counteract the human biases that result in bad investment decisions. This process, Maguire says, must be fairly simple to understand and “must be implemented ruthlessly”. But it also needs to allow for differences of opinion. “We look for outliers, where fund managers are sticking their necks out. And the process needs to allow for that. When you look at a fund manager’s decisions and track record, those outlying moments are important to pin down.” 5. Look at the manager’s track record The two experts say you shouldn’t pay much attention to awards, although Singh says it may be worth looking at a fund that has consistently won awards over an extended period. Don’t forget, the person managing the fund may have changed since the fund's last award. If you are looking at past performance, which is no guarantee of future performance, Maguire says it’s worthless looking at anything less than five-year periods. “The top South African fund managers are quite consistent for five-year performance over long periods. Any shorter period is absolutely meaningless. There is nothing predictive to be gained by looking at shorter than five years, and five years is slightly less predictive than 10,” he says. 6. Consider fees in context All management fees should be clearly stated on the fund’s minimum disclosure document, and these may include a performance fee. Singh says the lower the risk for the fund, the lower the fee should be. For example, a cash fund will have lower fees than an equity fund because it is lower risk. “Remember that fees represent the type of product, not the quality of the product. Higher fees are not an indicator of better quality in the investment world.” Importantly, make sure you understand the total investment cost, which may include advice fees, Singh says. 7. Be patient It’s essential that once you have made your choice, you stick to it. “It takes time for a fund to achieve its objectives – typically between three and five years,” Singh says. “There will be periods when the fund’s strategy is out of favour, and that’s okay. You need to consider it in a long-term context and understand how and why the strategy that is out of favour today can make a comeback in a few years’ time.” Written by: Martin Hesse Source: Personal Finance
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Delaying saving for retirement is not uncommon. Other life costs seem more important – there’s a wedding to pay for, a deposit for a new house to put down, a baby, school fees and that holiday you absolutely must take. And, even for those of us who have been forced to save (thanks to a compulsory pension fund or retirement annuity deductions at work), it might not be enough. It certainly pays to start saving as early as possible, but if retirement is suddenly closer than you realised and you haven’t saved enough, it’s never too late to start. Make the most of your time It’s not only the amount of money saved that counts, but also when we start saving. The earlier you start, the more affordable the amount of money you need to put away each month will be. More than half of us only start saving at age 28, instead of when we start working. And there are many people who only start in their thirties, or later, when they hit 40. The thing is, it’s not just about “catching up’ savings over the last five/10/15 years that you've missed. That’s a tall order in itself. It's about making up the compounded returns you've completely lost out on! Imagine a saver, Xoliswa, who starts saving for retirement at age 25. (Please note that the following calculations illustrate a point about compounding and time, and do not account for inflation-adjusted increases in contributions.) Saving R5 000 a month, at an average 6% return per year over time, she’ll have more than R7 million by age 60. Mark starts saving at age 35. He will only have R3.46 million at age 60 less than half what Xoliswa saved. To get anywhere close to Xoliswa’s amount, he’ll need to save R10 000 a month to reach R6.9 million in his 25-year investment horizon. Starting even later – at age 45 – and you’re in an even more difficult scenario. Even saving R20 000 a month – four times what Xoliswa started saving at age 25 – won’t even get you to R6 million. That’s why it’s so important to follow Xoliswa’s example and start saving for retirement as early as you can. But even if you’re starting saving late, the most important thing is that you’re starting. How much do you need? Figuring out how much you should have saved is tough. The general rule of thumb in South Africa is that you’ll need to be able to replace 75% of your income to retire comfortably. This assumption relies on the fact that you won’t have a home loan or any other large debt by that age, which means your monthly expenses will be lower. But, increasingly, financial planners are beginning to work on a 90% replacement ratio (especially since medical expenses tend to rise after retirement). Assume you’re retiring today with a final salary of R40 000 a month (R480 000 a year). To replace 90% of your salary, you would need R10.8-million saved to maintain your standard of living (note that this amount also takes account of the 4% rule, which we will discuss in more detail in a later article). Most people will be very lucky if they have three-quarters of that. Boosting your savings So, if you’re nearing retirement and you’ve come to the conclusion that you need more savings to retire comfortably, you need to consider the following points:
To start saving for your retirement, please contact Kevin or Ray, email: invest@daberistic.com tel no: (011 658-1333) Source: Discovery Coronation Strategic Income Fund: Conservative fund for short term investors requiring an immediate income. What is the fund’s objective? Strategic Income aims to achieve a higher return than a traditional money market or pure income fund. What does the fund invest in? Strategic Income can invest in a wide variety of assets, such as cash, government and corporate bonds, inflation-linked bonds and listed property, both in South Africa and internationally. As great care is taken to protect the fund against loss, Strategic Income does not invest in ordinary shares and its combined exposure to locally listed property (typically max. 10%), local preference shares (typically max. 10%), local hybrid instruments (typically max. 5%) and international assets (typically max. 10%) would generally not exceed 25% of the fund. The fund has a flexible mandate with no prescribed maturity or duration limits for its investments. The fund is mandated to use derivative instruments for efficient portfolio management purposes. Who should consider investing in the fund? Investors who are looking for an intelligent alternative to cash or bank deposits over periods from 12 to 36 months; seek managed exposure to income generating investments; are believers in the benefits of active management within the fixed interest universe. What costs can i expect to pay? An annual fee of 0.85% (excl. VAT) is payable. Fund expenses that are incurred in the fund include trading, custody and audit charges. All performance information is disclosed after deducting all fees and other fund costs. We do not charge fees to access or withdraw from the fund. How long should investors remain invested? The recommended investment term is 12-months and longer. The fund’s exposure to growth assets like listed property and preference shares will cause price fluctuations from day to day, making it unsuitable as an alternative to a money market fund over very short investment horizons (12- months and shorter). Note that the fund is also less likely to outperform money market funds in a rising interest rate environment. Given its limited exposure to growth assets, the fund is not suited for investment terms of longer than five years. Source: Coronation The Annual FIA Awards took place in June 2018 at the Sandton Convention Centre . The award ceremony was attended by more than 900 industry players all there to celebrate the excellence of the brands in the insurance, underwriting and investment space. 2018 Insurance Apprentice Winner, Noxolo Dlamini and CN&CO’s Carel Nolte had the audience entertained and presented the awards across the nine categories. The evening was not only a celebration of exceptional insurance brands, but also an opportunity to highlight the value that the intermediaries bring to the table. “These awards demonstrate how product providers enable our members to serve their client,” says FIA CEO, Lizelle van der Merwe. A big thank you to our main 2018 partners, Bidvest, Global Choices, Hollard, ITOO, Lombard and Santam for their support. Congratulations once again to all the winners! The 2018 FIA Award winners: Dear Discovery Health Clients Discovery has instructed that brokers no longer are able to change the banking details on behalf of clients using the Discovery form. Members are now required to change details by themselves on the Discovery websites. The only people that will be allowed to use the paper form is:
Benefits of updating your banking details online
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You can register or log in to the website on www.discovery.co.za. Please contact Namhla or Judy in our Health Department, email health@daberistic.com , to find out about different Medical aid options Source: Discovery Excess payments are among the most contentious aspects of car insurance. Here are answers to common questions about insurance excesses and tips to check on whether you have the right policy for your risk exposure and your pocket. What is an insurance excess? The excess is an amount of money that will come out of your pocket when you claim against your car insurance. For example, if you have an approved claim of R100 000 and your excess is R5 000, you will pay R5 000 and the insurer will pay R95 000. If your excess is R5 000 and the cost to repair to damage to your car is less than R5 000, you will need to pay the full amount. Why do insurers charge an excess? The excess is a way for insurers to ensure that the cost of premiums remains affordable. Without an excess, insurers would need to process high volumes of small claims, which in turn would mean it would be necessary for them to charge higher premiums. Excesses lower the insurer’s administrative costs since customers won’t claim for every small scratch or ding to their car. This is important for traditional insurers, who need to run large back-office teams and infrastructure to handle claims. They give customers a financial incentive to take care of their vehicle, since they will also need to pay towards repairs if they’re involved in an accident. They discourage people from making multiple claims that could reflect badly on their claims history. Why should you look out for in the fine print about excess payments? Often, signing up for lower monthly premiums for car insurance will mean that you will need to pay a higher excess in the event you need to claim. Most insurers are transparent about the basic excess, which may be up to 10% of the value of the damage to your car in an accident or of the total value of the car if it is stolen or written off. However, many insurers also impose extra excesses if any of the following are true:
What happens if you were not at fault in an accident? In theory, your insurer should aim to recover your excess from the driver at fault or his/her insurer and refund the money to you. In practice, 70% of cars are uninsured in South Africa, many of the drivers are unable to pay the damages, and the amounts are so small that it’s not worth pursuing legal action to recover the money. That means there’s a good chance you’ll still pay the excess when the accident is not your fault. So how do I find the policy that meets my needs? You should consider the following factors in your decision:
To get assistance with claims please contact Edmond in our Short-Term Department email shortterm@daberistic.com, tel (011)658 -1333 Source: Personal Finance Prescribed Minimum benefit is a set of defined benefits to ensure that all medical scheme members have access to certain minimum health services, regardless of the plan they have selected. The aim is to provide with continuous care to improve their health and well-being and to make healthcare more affordable. PMB’s are feature of Medical Schemes act, in terms of which medical aid schemes have to cover the costs related to the diagnosis, treatment and care of • Any emergency medical condition • A limited set of 270 medical conditions ( defined in the Diagnosis treatment pairs) • 25 chronic conditions ( Defined in the Chronic Disease list) Did you know as a medical scheme member, you have cover for over 26 PMBs Already, you can find out more about these PMBs by • Visiting the council for Medical Schemes PMB page for a definition of an emergency medical condition • Access the Council What are emergency conditions? An emergency medical condition means the sudden and, at the time, unexpected onset of a health condition that requires immediate medical treatment and/or surgery. If the treatment is not available, the emergency could result in weakened bodily functions, serious and lasting damage to organs, limbs or other body parts or even death. In an emergency it is not always possible to diagnose the condition before admitting the patient for treatment. However, if doctors suspect that the patient suffers from a condition that is covered by Prescribed Minimum Benefits, the medical scheme has to approve treatment. Schemes may request that the diagnosis be confirmed with supporting evidence within a reasonable period of time. Is pregnancy a PMB condition? When you fall pregnant, your pre-existing PMB conditions remain covered in full, as well as any PMB condition that you may develop during pregnancy, however you need to be covered by the medical aid or coming from another medical aid with no break of more than 90days. To see if your condition qualifies for PMB cover please contact Namhla in our Health Department email health@daberistic.com , tel (011)658 -1333 Source: Namhla Zwane |
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