![]() Dear client, I thought it would be useful to explain the way we think about inflation and your investments as I’m not sure I’ve fully elaborated on this before. So, to start, let’s talk about inflation. Inflation is a relatively simple concept, used to describe the gradual rise in the cost of goods and services. For example, a loaf of bread or the cost of petrol. Inflation is generally healthy if it’s in the 2-3% per year range, but it is considered to be unhealthy if it falls too low or rises too high (the idea is that we make steady progress over time). For this reason, the central bank will adjust interest rates to control it. Inflation is important today because it is currently rising from a very low base, but it’s perhaps rising too quickly. This is understandable, given the reopening of the economy, yet is garnering headlines and has caused some volatility among certain assets. We should also keep in mind that the job of your total portfolio is to increase your purchasing power over time. Some assets we hold will do better in a period of higher inflation and some will do better in a period of lower inflation. The key is to strike the right balance for your long-term goals and risk tolerance, which is a core part of your financial plan. On this, the return on cash (interest) typically fails to keep pace with the rising prices of goods (inflation). Therefore, as a long-term pursuit, cash is actually a very bad investment. Hence, unless we have absolute certainty that the markets are nearing the peak, which is extremely difficult, putting everything in cash is rarely a good idea. We therefore use cash selectively as an investment tool. This is already done within your portfolio, where cash is treated as any other asset class available for allocation. This means that as the attractiveness of other available assets rises relative to cash, cash allocations should fall and vice versa. Therefore, cash plays both offense and defense, by being used as ‘dry powder’ for adding undervalued assets to the portfolio and by buffering against rich valuations. This brings us to a crucial aspect of wealth creation and preservation – we need to be a step ahead of our own emotions as well as other participants emotions. So yes, cash may feel like the best place in the darkest moments (so-called “cash is king”), but it is a poor choice when considered as a long-term pursuit and only tends to work if we increase it before the market decline occurs. At heart, we remain confident that your portfolio is well positioned to navigate different inflation environments. We can’t rule out the odd setback (whether due to inflation, covid, or otherwise), but wealth creation is often about avoiding the biggest mistakes, which is why we’re diversified across different assets. We want to “be greedy when others are fearful and fearful when others are greedy”, but we also want to manage risks along the way. Bringing this together, we want to reiterate that we are aware of the current inflation discussions and your portfolio has been thoughtfully considered in this light. If you would like me to elaborate further on this, or any other matter, I’d be delighted to chat. Regards Kevin Yeh, CFP®
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![]() Last month I talked about Step 3 - Do not take on credit. Let's continue with Step 4 - Keep a record of your spend. The foundation of good personal finance is budgeting. Expense tracking is the twin brother of budgeting. Budgeting is the process of creating a plan to spend your money. This spending plan is called a budget. Creating this spending plan allows you to determine in advance whether you will have enough money to do the things you need to do or would like to do. Budgeting is simply balancing your expenses with your income. Track your daily expenses for a minimum period of three months. At the end of each month, sit down and analyse where your money has gone, so you can identify ways of cutting expenses. You will be surprised to find you have been paying every month for something you have not used. There are many ways of tracking your expenses:
2021/5/15, groceries, R522.35 2021/5/16, DSTV, R499 2021/5/16, Nandos takeaway, R136
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Google Play store: Mint - 4.5 rating Goodbudget - 4.4 rating Spending Tracker - 4.5 rating Monthly Budget Planner & Daily Expense Tracker - 4.7 rating If you like to blend expense tracking with gaming, try Fortune City - 4.4 rating 22seven is developed locally in South Africa, now part of Old Mutual - 4.0 rating Apple App Store: Mint - 4.8 rating Goodbudget - 4.7 rating Spending Tracker - 4.8 rating If you like to blend expense tracking with gaming, try Fortune City - 4.5 rating 22seven is developed locally in South Africa, now part of Old Mutual - 4.2 rating
Share with us your story of tracking expenses and budgeting! We'd love to hear how it goes with you. Ninety One (formerly known as Investec Asset Management) Global Franchise Feeder Fund has a long track record (25 years), managed by veteran portfolio manager Clyde Rossouw, focused on investing in global quality companies. The fund seeks to invest in world leading companies with strong competitive advantages, superior margins and focuses on capital re-investment, with a high-conviction portfolio of 25–40 stocks of primarily investment grade companies, with high customer loyalty, strong brands and no debt. It is an equity-only fund adjusting exposure to maximise downside protection and participate meaningfully in rising market. This fund is also part of the managed portfolios developed by Morningstar for our clients. Through us you access the institutional fee class with lower fees. ![]() South African Market Update South African equities ended higher for a sixth consecutive month, despite poor performance from large industrial counters including Naspers, Prosus and British American Tobacco acting as a headwind to the performance of the local equity index. Local bonds ended the month higher, supported by a stronger rand over the month and outperforming both aggregate developed and emerging market bond indices. Local listed property had a strong month, as the asset class continues its recovery amid the local economy returning to more normal levels of activity post the Covid-19 induced lockdown at the beginning of the year. The rand was largely stronger against most major developed market currencies over the month, receiving continued support from the positive trade balance caused by higher commodity prices and subdued imports. South African Economic Update Following weak economic data in January due to the Covid-19 induced restrictions, trade data for February (which was released in April) rebounded strongly. Wholesale and retail trade recorded month on month increases of 1.3% and 6.9%, after falling -0.9% and -2.4% respectively in January. SA’s trade surplus widened to R52.8 billion in March (from R31.2 billion in February), which is the widest surplus on record and continues to provide significant support to the rand, one of the best performing emerging market currencies year to date. SA headline CPI moved higher to a year-on-year figure of 3.2% for March (from 2.9% in February). Local inflation continues to surprise on the downside, however, inflation is expected to rise further over the next few months, largely due to base effects and higher international prices. Global Market and Economic Update Global equity markets continued to climb higher in April, supported by surprises in terms of positive economic data and company earnings releases. As at the end of April, 87% of S&P 500 companies have posted Q1 2021 earnings which beat estimates, with earnings growing by an average of over 46% year on year. US President Joe Biden addressed a joint session of Congress during the month, motivating for a $2 trillion infrastructure plan and a newly unveiled $1.8 trillion plan for families, children, and students. President Biden is proposing that the American Families Plan is largely funded by additional tax of $1.5 trillion on the top 1% of earners as well as increased levies on capital gains and ordinary income for those earning more than $400,000 a year. The US is expected to reach its pre pandemic level of output midway through 2021, with record stimulus packages and low interest rates providing significant support to aid economic recovery. The positive moves in global equity markets came despite uneven Covid-19 vaccine distribution across developed and emerging markets, with many key emerging markets struggling to source and distribute vaccines, leading to spiking infection rates in certain countries (particularly India and Brazil). Source: Morningstar
Given that COVID-19 is a global pandemic, all governments are required to coordinate and manage the response to the disease in the best way they can. As is the case in other countries, the South African Government has decided that it will source, distribute and oversee the rollout of the vaccination programme, and will therefore be the sole purchaser and distributor of the COVID-19 vaccines to provincial governments and the private sector, including medical schemes.
With the roll-out of the COVID vaccine, the South African government has also had relevant regulation, and different Medical Aid companies have their own relative ways to cooperate. The vaccines provided by the government are Johnson and Johnson (one dose) and Pfizer (two doses), and the Medical Scheme must be carried out according to the Government’s progress and allocation phase. As of 16 May 2021, people over the age of 60 are allowed to register on EVDS. South Africans must register on the Department of Health (EVDs) at the following website, when their age group is open to register: https://vaccine.enroll.health.gov.za/ Discovery Health In addition to the Department of health's online registration (EVDs), Discovery has launched its own registration and tracking program. Please refer to our article about the process and registration steps: https://www.daberistic.com/discovery_covid_vaccine_english.html Momentum Health Momentum is preparing to provide vaccines in an efficient way to assist members and the public to obtain vaccines in their allocated phase, the following has been established:
Momentum will communicate exact locations of the health care centres. Bonitas Health Bonitas Health did not give any special instructions, but for members who are qualified to register on EVDS, Bonitas has sent a SMS and an e-mail directly to the members. After receiving the invitation, they can register on the website of the Department of Health, and follow the process further. The economic downturn over the past year, coupled with the need to reduce expenses, has seen a rise in vacant properties across South Africa and an increase in co-habiting. Taking the decision to move in with a housemate or your partner is a big step. It’s wise to consider the emotional, financial and insurance implications and have critical conversations upfront.
Marius Steyn, Personal Lines Underwriting Manager at Santam, and Marius Neethling, Manager Personal Lines Underwriting (Systems and Administration) at Santam, caution that there are a few considerations people need to think about when merging households. “In the scenario where you move in with your partner, an insurer usually considers you the equivalent of a common-law husband and wife, depending on the seriousness of your relationship. That means you can take out a policy together. If you are moving in with a housemate, both parties will need their own separate insurance policies. In this case, you will have to insure your own belongings and communal living underwriting rules will apply. In both cases there are lots of logistics to tick off – like making sure the household contents are covered.” Here, Steyn and Neethling chat through the checklist to tick off before co-habiting: Make sure you’ve adequately covered the combined contents of your home: Moving in together often results in a staggering amount of ‘stuff.’ Which means you and your partner or housemate will probably need to update the household contents insured amount. If your relationship is seen as serious (insurers look for things like how long you’ve been together, if you’ve co-purchased furniture, etc.), then an insurer will treat you the same as they would a married couple. This means you can take out a policy between you, with one person being the main policyholder and the other, the additional insured. Some considerations:
If you happen to have a fight and temporarily move out… It’s not commonly known, but, if you happen to argue and temporarily move out and take some of your household contents with you, these items will still be covered in your temporary abode, providing this is a private building – not a tent or caravan, for example. This only applies to a temporary situation though – if it’s a permanent split, then you’ll need your own new policy. Vehicle insurance is also important: Remember to add your partner as a regular driver on your policy if he or she uses your vehicle more frequently than you do. If it really doesn’t work out: If, sadly, the relationship comes to an end, then you should get your own policy as soon as possible, especially if you have one policy between you, but you’re not the main policyholder. Remember, if you’re the additional insured, it’s up to the policyholder to pay you in the event of a claim, which could get difficult if you’re not together anymore. If you would like to get a free quote comparison please contact Marizka in our Short-term department email: [email protected], tel: (011)658-1333 Source: Personal Finance On 6th May 2021, Discovery Medical Scheme, South Africa's largest Medical Scheme, announced that the premium increase will start from 1st July. Ryan Noach, Chief Executive Officer at Discovery Health, said that they did not increase their premiums as usual at the beginning of this year, which helped members to save a total of R2.2 billion. He explained that their Medical Scheme is 17 percent cheaper than other Medical Schemes on average. Ryan Noach announced a 5.9% premium increase from 1st July. The total weighted average contributions paid by the members will only increase by 2.95% in the whole 2021, compared to other industry where the members have experienced an average increase of 5.5%. Here is the table of the new premiums from July. Members will receive an email notification about your premium and benefit adjustment in the next two weeks. You can also go to the Discovery website or log in to your discovery cell phone APP, or consult your medical aid broker. If your health care needs or budget has changed, you can change your medical aid option before 15th June, including upgrades and downgrades.
Discovery also proposed a special offer to all members. For both new and old members, if they have not participated in Discovery Vitality or Discovery Gap Cover in the past year, they can now enjoy three months free of charge from 1st July, as long as they join the Vitality and Discovery Gap Cover before the end of June. It means you can save at least R500 per month in the first three months. In addition, they Discovery has shared about the Vaccination programme and also explained the importance of members getting vaccinated, you can read more about the process Click here to read more. If you haven't subscribed to our YouTube channel, please click here to subscribe! |
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