South African investors are facing a real dilemma: Where do I invest for returns that can at least beat cash over the medium term? The graph below serves to illustrate the matter at hand. Over the last 3 years, cash has given a return marginally over 7% per annum. The average balanced unit trust fund, i.e. the one’s in which the bulk of your retirement savings are invested, has given just a tad above 6% per annum. Not a comforting thought for someone looking to maximise savings for retirement!

The JSE on the face of it, has done better at an annual return of 9,39%. But the situation would look a lot poorer if you discount the rally between July and November last year. Another important factor to consider is the darling of the JSE, Naspers. This share had a cumulative growth of 89% over the last 3 years, and on average comprised 18% of the JSE. This leads to the fact that Naspers contributed 16% of the JSE’s all in return of 28% over the 3 years. Strip out this performance and the JSE, for all its volatility only delivered a paltry 4% per annum.

The past is the past, and water under the bridge. But with all the political and economic uncertainty facing South Africa, there is very little to make an investor positive about local listed investment prospects. South African retirement funds are required to have at the very least 70% of their asset base onshore in SA. This leaves the only major attraction of South African retirement funds being the tax break that one gets when investing.

WITH ALL THIS IN MIND, WHAT CAN INVESTORS DO TO MAXIMISE GROWTH?

• Costs: Watch costs closely. In a low return environment costs play an increasingly important factor. Beware of smokes and mirrors, force your advisor to disclose all manner and types of costs that place a drag on your investment performance.
• Active v Passive: If very few active fund managers are beating the market, strongly consider passive ETF trackers, or at the very least a blend of active and passive strategies.
• Offshore: Last but not least, constantly review means as to how you can get increased offshore exposure for your portfolio. This is not only about the currency. Offshore, one can get exposure to a far more diversified blend of quality companies across all market sectors.

We are fast approaching the end of 2018, don’t delay. Review your investment portfolio and make sure that it is optimally positioned in terms of your strategy and objectives. Make an appointment to see one of the Activ8 advisors.