“Street Notes” – October 2020
Quote of the Month
“Real Integrity is doing the right thing, knowing that nobody’s going to know whether you did it or not”
– Oprah Winfrey
Global Geopolitical tensions and the threat of further lockdowns in a number of countries worldwide seemed to be the main trigger for markets to move lower during the month of September. Adding to the ongoing Corona issues, the political volatility in the US has made investors nervous. The all-important US election is now 5 weeks away and no-one seems to have a firm view on what will unfold with President Trump refusing to commit to accepting the result of the election and already claiming wide-scale voter fraud. The 1st Presidential debate between Trump and Biden seemed more fit to be hosted on the Jerry Springer show and gave very few an indication of what the respective policies of the candidates were. The market moves are certainly reflecting this.
With all of this in the mix, we saw the local bourse ending significantly in the red after a strong start to the month. Despite this, equity markets remain well off their lows of the 1st quarter. On a positive note for SA Equities, SA Inc shares including banks and domestic retailers bounced back nicely during the month.
The Rand had strong month appreciating against all of our main trading partners. On the global front, equities saw their worst month since March 2020 as volatility was high, seeing risk appetite diminishing over the month.
Return on Life
As we work together with our clients, there a couple of main things we want to help them with. One is we want to help them get a return on their investments. We want to help them get the best financial return possible on their investments within the level of risk that they are comfortable with, and the second thing is, we want to help them get the best life possible with the money that they have. Essentially, we are trying to serve on 2 levels, one is on return on investment (the money) and the other is return on your life (the qualitative). The ROL Index is a tool that helps us determine how and where you want to apply and use your money to get the best return on your life. Please email me if you want to take the assessment.
Pic of the month – relative size of the big tech shares in the Nasdaq Composite Index compared to remainder of the index
Courtesy Nedgroup Investments Pulse Report
The NASDAQ Composite Index is a large market capitalisation weighted index of more than 2,500 stocks. The composition of the index is nearly 50% technology, with consumer services, health care and financials being the next most prominent industries.
Tip of the month -Direct offshore or feeder funds
Offshore investing is extremely important for South African investors. Not only gaining access to some of the world’s best companies but also offshore investments potentially offer buying power protection against a weak currency. The debate often revolves around the ideal percentage of one’s portfolio to expose to offshore markets. This is not a one size fits all answer and it very much depends on each investor’s unique future income requirements.
Broadly speaking there are 2 routes to choose when investing offshore. One is taking funds directly offshore using your annual foreign investment allowance and the second is investing offshore through accessing feeder funds in ZAR. A feeder fund is a South African based unit trust that feeds directly into an offshore fund using an investment company’s asset swap capacity.
Which route is better? The benefits of going the feeder fund route is that is simple from an administrative point of view. No SARS tax clearance is needed and one does not have to engage forex companies or banks to facilitate the transfer. The compliance requirements are also not as stringent. Direct offshore offers the advantage of generally lower fund fees for the same investment option and the peace of mind always knowing that these funds are officially offshore and can be accessed for an offshore future lumpsum or income requirement. The tax implications of the 2 options are also very different. Tax implications of investing offshore is a whole topic on its own.
If you would like more clarity, please email me directly at [email protected]