Monday, April 21, 2014

[Take Action] I Am An Investor South Africa

My latest project is called I Am An Investor South Africa. It has been inspired by a US group called I Am An The headline of the US organisation is:

We are all investors.
Will you let Wall Street know it's time to listen to us?

I think their aims are commendable. I then look back home to South Africa and realise that our Financial Services sector itself has a lot to answer for. High costs and limited transparency are hallmarks of the industry. I do think FAIS will assist in eliminating some of the bad eggs in the sector but at the end of the day it is up to the investor to equip themselves with the right information necessary to make an informed decision. At the very least know the right questions to ask.

A central focus of the project is investment costs. Often these costs can be hidden quite well and not explained to the investor. Read anything that John Bogle has written about the tyranny of compounding costs and you will surely be motivated as an investor to take action.

So in essence,  I Am An Investor South Africa is about educating the man on the street. A noble cause I think. I will give it a good go and see how it pans out over the next few months. At the end of the day building your wealth starts with you.

The basic website is up and running ( I Am An Investor South Africa) and further content will be added in the coming weeks. Please join the Facebook group here in the meantime. Many thanks for any support!

Friday, April 18, 2014

Learning your own way and at your own pace...

I don't know about you but I think is critical to pick up new skills regularly. To be honest these skills don't even have to have anything directly to do with your day job. It is more important that you learn to think, solve problems, learn to be more effective and so on. But maybe I am just weird and I am obsessed with doing so... in fact, I feel like there is not enough time in the day for all the things I want to learn. If I have my way I would be enrolled for about 7 courses and trying learn everything I can but sometimes I have just reel myself in and quietly chant to myself "one step at a time".

So what am I doing about this all? Well I am enrolled in a Computer Science course called Machine Learning 1: Supervised Learning. You do the course at you own pace and your own way. It is delivered by what I think is one of the greatest websites in the world: The great thing about Udacity is that you can enroll in a course for free and have access to the entire course experience (i.e. videos, discussion boards etc). There is a "premium" option too. For a mere $150 a month (yes I know converting USD to ZAR magnifies that number), you get an assigned coach who helps you through the course, a project that is graded and a verified certificate of completion (which is only given to you after the have verified that the project was in fact done by yourself through a series of video interview questions). I ended up going for the premium option so that I actually would give the course a proper go (Somehow it seems easier to motivate yourself to do something if you have paid for it).

This is actually the second course I am doing through Udacity. I did Introduction to Psychology (in partnership with San Jose State University) before. This course was very new age and I ended writing online exams being watched over webcam by a Proctor (Referee type person) while I wrote the exam.

Skeptics may worry about quality but a lot of the courses are designed in partnership with well-known US universities and companies (San Jose State University, Georgia Tech, Google - to name a few).

Now why would a fund manager need to know Machine Learning. Well, they probably don't but it no doubt gets the brain thinking about solving problems which is transferable across just about any career.

Udacity is mainly focused on data science and computer science (bar one or two exception) but there is also another great resource called I haven't attempted any courses here but there are tons to choose from.

I truly think it is websites such as these that will transform the way we learn new skills. Think of the number of people that have massive student loans that need to paid off when they start working... perhaps this is the first step in providing relevant, inexpensive and importantly high quality skills to a wide range of people.

Sunday, March 23, 2014

Beware of performance fees...

A quick thought for the day...

So often you hear that you need to align your fund manager’s interests with your own interests as the investor. So the financial services sector came up with this thing called performance fees. The pity about fees is they are offset against any income a fund pays its investors. You therefore run the risk of having nothing to re-invest in your fund as the fees in some years will be far greater than the income received from the underlying investments. (this is because the Total Expense Ratio of most general equity funds is higher than the dividend yield before fees)

Ah, but you counter surely if the performance fee is high it means my investment has performed well… alas you are correct over the short term but a vast majority of that return is what could be termed speculative return… just remember your friend the market can take that back (in nominal and/or real terms) very quickly.

In my humble opinion, I think the more conservative and BETTER approach is to make investments that pay a decent level of income that grows with or above inflation over time. I can then use that income to buy MORE units of investment and great long-term growing wealth. Just a thought.

The below chart simply shows the difference in re-investing dividends and not re-investing dividends.

Sunday, September 1, 2013

[Opinion] So what if the market crashes...

When the average investor buys a stock, he or she sits back for some reason and hopes to see the latest purchase climb steadily upwards. Unfortunately, far too many of us buy a stock only to see it drop in price after the purchase. It is almost as if the market has conspired against us, and this drives home how very difficult it is to time the market. So, if we cannot time the market, would the next best thing be to just spend time in the market?  

To illustrate this concept, imagine the unthinkable happening: your stock drops 20% or more the month after you have bought it. Armageddon! But is it really the end of the world? This is not necessarily the case for investors whose objective is to earn a healthy return in excess of inflation over the long term. These investors have a long-term horizon and invest in what I call dividend Payers & Growers™, the companies that consistently pay dividends and consistently grow their dividends year in and year out.

Wednesday, June 12, 2013

[Investment how-to] 15 Steps by Philip Fisher

There are plenty of books out there with the so-called "secrets" of investing. "Common Stocks and Uncommon Profits" by Philip Fisher is one the better ones. He succinctly sums up his investment criteria into 15 points. He often refers to the "Scuttlebutt" approach which means you need to get away from you desk and actually speak to and interview relevant people. Definitely a book worth purchasing (click here to go to amazon). 

Here are his 15 Points: