Archive for February, 2017

Twenty-Nine Years and Retirement

While my official retirement date is supposed to be 01 April 2018, I have decided that after 29 years in the business, I am able to leave it in the very capable hands of Thomas Foster, Victoria Roberts and their esteemed team of experts, and retire on 30 June 2017.

I have been in the financial services industry for 43 years and at the helm of Foster Wealth for 29 years.

Reflecting on the last 29 years has been a very interesting exercise. When I started the business there were 36 Unit Trust funds available to clients. There are now 2103 funds available that cover over 30 different categories of investments.

Another interesting fact is that while there is talk in the industry about investment being a long-term business, portfolio managers still hold shares for between 20 and 42 months on average. *

One wonders where the word long-term fits into this picture…

The other important milestone on my journey was the introduction of the financial advisory and intermediary services act, commonly known as FAIS, in 2014. This Act attempted to regulate the way financial advisors interact with their clients and the products they sold. The Act has been reasonably successful in achieving its aims but, honesty, integrity and loyalty to clients have in any event been the hallmarks of our business since inception in 1998.

My journey has been an interesting and challenging one but my general feeling is a sense that it has been a tremendous privilege to serve you as clients and an even bigger privilege to have been part of your lives. Many of my clients have been with me for nearly the whole of the journey and I am extremely grateful to you.

As said, I will be leaving you in capable hands. For your interest, I would mention that for the foreseeable future, I will still be a member of the investment committee, a Director of the company and of course a client.

I wish you all good health and everything of the best for the future.

Peter Foster February 2017

*UNIVERSITY OF PRETORIA

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The Stock Market: why aren’t we learning this at school?

The driving energy of economies is the stock market. It underpins our savings, investments, pensions, policies – in fact our very lifestyle, standard of living, achievements, aspirations and everyday experience. It is the engine of development, business, progress and the creation of wealth. It is the wheel of fortune, the genie jar and sometimes the deadly game of Russian roulette. But whichever way you look at it – it dictates our experience of life in one way or another. It is fundamental to how we have set up our monetary systems in the world.

So why isn’t it taught at school?

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Shares or unit trust funds, or both?

Bongi has been working for a few years and is now financially stable enough to start investing. Should she invest in shares or unit trust funds, or both?

Foster Wealth answers:

Buying shares and building a successful portfolio is a full-time job.

In order to buy a share of a particular company, you would need to do research and learn about the company and understand its financial position and future prospects. Otherwise it’s just speculation.

We have so many brilliant fund managers in South Africa. We would suggest unit trust funds because she can get a well-diversified portfolio, managed by professionals.

She can also participate in more than just one asset class. Deciding which fund managers to go with and then which of their funds to use can be daunting, please contact us for guidance on setting up a solid investment portfolio.

Now that Bongi started investing, what are key indicators of a healthy market, and what should she look out for?

Foster Wealth answers:

Now that the she has started her investment journey, she will need to be more aware of noise vs. fundamental change in markets.

We need to acknowledge that a country’s economy and its financial markets are different and are driven by different things. Signs of a healthy economy include:

  • inflation rate being within target;
  • unemployment being as low as possible, if not zero (what a thought!); and
  • acceptable debt to GDP levels.

Financial markets (stock market, bond marke,t listed property market) are a bit more complicated. In short, we want to see that share prices are in line with the earnings of that company.

Our fund managers need to be aware of a large number of fundamental indicators:

  • They could also use a technical approach (this relates more to traders than to long-term investors), just think fancy charts!
  • Or be quants driven in their approach (think numbers and spreadsheets!)

It all comes down to the valuation of a share, bond or property. Then the fund manager will make a call to buy, sell or hold based on their philosophy. The tricky part of investing is that markets are often irrational, so something that is expensive keeps getting more expensive and when something is going at a great discount, it could be unpopular and just get increasingly cheaper, even though the company is very well-run.

So Bongi would want to check in with her advisor, probably annually, to make sure she is keeping her portfolio in line with her goals and making adjustments when necessary. She would also need to trust in her advisor and the fund managers that they will do what is rational over the long-term and that it will pay off to be patient and brave.

Bongi is planning on buying a house soon. How will investing in stocks help her to pay off her house?

Foster Wealth answers:

Bongi needs to determine for how long she is willing to invest. If she buys a house in the next year or so, she needs to be very conservative and perhaps the stock market is not the place for her. She would be better off in a stable/income fund. Even if she has a 5-year time horizon, picking specific stocks is a full-time job. We would recommend that she invests in unit trust funds where she can get a wide selection of different stocks, property and fixed income assets.

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