Woman&Finance is a platform that educates and inspires women to take charge of their finances. We empower our clients with financial tools, tips and techniques through our 1-on-1 personal finance coaching, employee financial wellness programs, workshops & webinars.
As I mentioned on Instagram (@womanandfinance) earlier this week; I wanna try something new here on the Woman & Finance website, I want to start doing podcasts where I share my thoughts on different topics around money.
To begin with these type of podcasts, I thought it would be fun to start off by sharing with you my own financial journey and how I manage my finances so far!
According to annual BEE.conomics Transformation in SA Asset Management Survey published by 27four Investment Managers, there are currently 48 black asset management firms in South Africa and they manage only 10% or R490.3bn of the R5 trillion industry.
While there has been growth in the number black fund managers and their assets under management in the past couple of years, it has been painstakingly slow. So, why is this? Why don’t we have more black fund managers?
Scale is a challenge for black managers, while there are new firms launched regularly, they struggle to gain critical mass due to lack of support from trustees, institutions and asset consultants. These are the gatekeepers who decide where to invest pension funds, but they tend to select the tried and tested traditional asset managers to avoid risk. The survey shows that in the past 12 months, there were 4 recorded business failures in asset management.
The challenge is not only with institutional investors. Even retail customers looking to invest in say, a unit trust, a retirement annuity or a tax-free savings account, for example, will normally go with the big brand names like Coronation, Allan Gray etc. instead of seeking out a black fund manager. This is largely due to of lack of access to markets and capital by black fund managers.
Understandably, in the asset management space, institutions and retail investors want to invest in a reputable organisation that has a good track record in order for them to develop trust that the organisation will deliver. This acts as a double-edged sword for most black asset managers. The survey shows that of the 48 black asset managers, only 15 firms are greater than 10 years old, and 23 firms are less than 5 years old!
It takes an enormous budget to advertise and market to become a household brand name. Think of all the ads on radio, TV, Gautrain or airports, all you ever see are the big brands i.e. Investec, Coronation, and Allan Gray etc.
Perhaps in trying to prove themselves, black asset managers have gone too much of the traditional route in terms of marketing and advertising, one would have thought, for companies established in the last 5 to 15 years, their approach would be less traditional i.e. print media, rather making use of modern technology and platforms to reach more retail client and become household names?
The numbers are even more sobering when it comes to females in the profession; of the 563 individuals employed by the industry, only 18% portfolio managers are female!
There is good news though, since the beginning of the survey since 2009, there has been a 243% increase in the number of black asset managers, albeit on a larger scale, the number is still small.
One firm, Taquanta Asset Managers manages 30% of the R490.3Billion, and 10 firms including Aluwani Capital Partners, Mazi Capital, Mergence Investment Managers, Argon Asset Managers then Vunani Fund Managers, manage 84% of the R490.3 Billion share.
More conversation and education is still needed to demystify what an asset manager actually does, to encourage more young black people to pursue a career in the asset management industry. Legislation too can help, but within organisations themselves, there needs to be a willingness to mentor and provide a conducive environment to become a fund manager.
George Soros once said, “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”
Investor Psychology is about the behaviour of investors; what they believe, how they act, what they do both in times of the bull market and bear market.
For most individuals, especially in South Africa the word investing in itself is not understood very well. I have had clients before who would ask me, “so if I invest in this, how much interest can I expect”! Clearly never having made the distinction between saving (traditionally in bank savings products) and investing.
Because of this lack of understanding, investors make really expensive mistakes while they are investing. It was American economist Eugene Fama, who argued that stocks always trade at their fair value, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices, yet studies into behavioural finance show that emotion and psychology play a role when investors make decisions, sometimes causing them to behave in irrational and unpredictable ways.
The most common investor psychology traps:
Investors think they can time the market
Greet and fear drive investors who think they can time the market. Greed in that, if they think they have some superior knowledge whether true or false, they will stay invested for much longer than the information holds true. Fear in that when some investors hear of a recession, a bear market or tough economics times, they pull back on their investments. An investor who times the market is really just a speculator, they are not in it in for the long haul, and they want the quickest way to make a profit
Investors buy expensive stocks
We have all heard the story, a couple of friends around the braai, talking about what share is doing well on the stock market; how they have had a lucky break because of their stock choice. Much like pyramid a scheme, if everyone is talking about it, you are probably late to the party! This is because of the “herd mentality or pack mentality”, where people are influenced by their peers to adopt certain behaviours on a largely emotional, rather than rational basis.
Investors sell in panic in a bear market
The temptation to get out of the stock market when things are not going well is huge. It is human nature to try by all means to avoid pain and bad experiences. That behaviour is no different when it comes to investing. When an unseasoned investor experiences loss, they tend to panic, sell at a loss and retreat from the financial markets.
Recently at the Alexandra Forbes Investment Indaba, financial writer and author, Morgan Housel highlighted and illustrated the Investor Psychology phenomenon. His talk showed that people cannot accept simple truths; they want what looks complicated and seemingly complex and challenging, therefore making it worthy of success. In the example he uses Warren Buffet, one of the world’s most success investors, whose simple philosophy is he invests in businesses he understands,
he ignores short-term market volatility and focuses on long-term returns.
Most individuals and investors expect about investing is that it will be complicated, high tech and almost not within reach for the laymen. When they think of investing they picture multiple trading screens and fancy algorithms. While the picture does bear some truth about investing, many successful investors have done well without the multiple screens and seemingly complex technology around investing.
To sum up, individual behaviour has a lot to do with investment returns; take for example, “Julia”, a middle-class woman who is a frequent guest on The Money Show on 702 with Bruce Whitfield, with her middle-class income, lots of discipline and guidance, has build a very impressive investment portfolio.
The takeaway from her approach is discipline, know why you are investing and even in the tough times keep on investing. Do not withdraw or exit from the markets. Although it is human nature to want to!
Gugu is a Senior Anchor on CNBC Africa and Presenter of Kaya FM’s prime time business show, Kaya Bizz. Gugulethu also serves as a Conference Chair, Panel Discussion Moderator and Programme Director at various industry gatherings that impact the business and investment landscape.
Having cut her teeth at Moneyweb, she worked for institutions like Talk Radio 702, SA FM, Lotus FM and the City Press Newspaper. Gugu has has gained a wealth of experience in Financial Journalism through Radio, TV, Print and Online Media.
I hope you enjoy this podcast as much as I enjoyed making it!
Buying property is probably the one of the most financially significant purchases you will make – it is therefore worthwhile to do your research and gather as many facts (both advantages and disadvantages) as possible.
Here are 5 things to consider before you buy a property:
Clean up your credit score
The first thing banks look at is your credit score. A credit score tells a potential money lender how well you manage your finances and pay your financial obligations. It is a snapshot of your financial life.
Stick to your budget
It is very easy to get dazzled with the added extras i.e fixtures and fittings, when viewing properties, tempting most people to think that an extra R100K or two is ok in the bigger scheme of things, because this property ticks all the boxes right?
Here is a calculation to show the actual cost you pay for not sticking to a set budget.
Let’s say your budget is R 1,300,000.00
You put down a deposit of R100,000
Apply and get granted a bond of R 1,200,000 with 10% interest over 20 years
Monthly repayment: R 11 580
Total interest: R 1 579 398
Total payment: R 2 779 398
Vs. you opting to purchase a property that is slightly out of your budget, say R 1,400,000.00
You also put down a deposit of R 100,000.00
Apply and get granted a bond now of R 1,300,000.00 with 10% interest over 20 years
Monthly repayment: R 12 545
Total interest: R 1 711 014
Total payment: R 3 011 014
Every Rand counts!
You will always find buyers purchasing a property that leaves them without any disposable income, as they are unable to deal with the monthly down payment as well as other costs like insurance, property tax etc. Avoid this common mistake by prudently calculating how much you can really afford. Choose a maximum price and stick to it. Even if the bank says you qualify for RX, look at your monthly expenses first and decide your affordability.
These are the documents that will be required, have them ready and on hand:
Copy of ID
Proof of residence
3 -6months bank account
3 – 6 months’ payslip
Personal Assets & Liabilities Statement for loan amounts over R1 500 000
Copy of Marriage certificate (if applicable)
Have a deposit on hand
Although some lenders do give 100% bond, this is not always the case. It is therefore encouraged to save up a deposit before you approach a bank for financing. For the lender, it reduces the risk of lending to you and gives them confidence that you will be able to meet your financial commitments.
For you the buyer, the biggest advantage to having saved a deposit is that it will benefit in the long term. The more money put down as a deposit, the smaller the home loan application, which translates into lower monthly repayments and a lower interest payment overall.
Beware of ‘hidden costs’ and running costs to maintain the property
Now, there are many other costs to be aware of other than the bond cost. If you are ready to purchase a property and you have decided to save for a deposit, these are costs that you will also have to pay upfront!
In our example of purchasing a R 1,300,000.00 house, you will also pay the following:
Bond Registration Cost Breakdown:
Bond registration cost (incl. VAT) R21, 390
Bank initiation fee (incl. VAT) R 6,037 Deeds office levy R 1,098
Postage, petties and other application fees (incl. VAT) R2,200
Then there are running costs of owning the property i.e utilities, rates and taxes, levies and homeowner’s insurance; these depend on the location of the property and its size.
Offer to purchase (OTP)
Another very important thing to note as you are about to purchase a property is the Offer to Purchase, this is a legally binding document one signs with an agent and it stipulates your intention to purchase a property.
As a first-time buyer especially, one can get clouded with excitement at the prospect of owning their first property and perhaps sign an OTP right away on first viewing, I’d suggest not. Rather ask for the document, read it further, ask detailed questions and only then, once comfortable and happy with what it contains, then sign.
I myself have been caught up in the above, it is a mess you do not want to go through if you want to withdraw from the agreement.
The best advice when it comes to putting your signature on the OTP document is to ask questions and more questions and don’t let the agent rush you!
That time of the year again; the tax season is officially in full swing. For those who don’t know exactly when it runs, this year it started from 1 July and will end 31 October 2018.
For many, filing taxes creates a lot of anxiety and most people leave it to the very last day…I have been here myself! But I believe in facing things head on, whether you do get a refund or you end up owing SARS, just get to it!
For those lucky enough to get a tax refund, have a plan for your refund. Money/Income that is not budgeted for has a way of ‘disappearing’ and leaving you with questions like “where did the money go”!
Here are a few ideas of where you can direct your new found small fortune:
1. Pay off your debts
Tribe, I think with all the challenges in the economy; VAT up from 14% to 15%, the petrol hike, the stagnant economic growth etc, most South Africans are on the brink of financial crisis. This could be yourself, your friends or even family members. Carrying high debt levels is not only stressful but really just keeps you from living your best life.
So, if you have debts that need to be paid, what better way to pay them off with some ‘free’ money. Don’t go creating more debt once it is paid.
2. Top up your Retirement Annuity (RA)
With only about 6% of South Africans who can retire comfortably and still maintain their lifestyle, it is a no-brainer to have an RA. You don’t want to be poppin’ bottles today and travelling all over the world but not be able to live like that in your old age when you should be enjoying your golden years. There are tax benefits to having an RA too. It is never too early to start saving for retirement.
If you do have a Pension/Provident fund with your employer, don’t just make the assumption that this will be sufficient.
3. Pay for your children’s education
We all know school fees bear a big price tag, so what better way to start putting money aside right now for next year’s school fees for you kid(s). I think it brings such a big relief knowing that important things like school fees are taken care of months and months ahead of time. And if you are comfortable and happy with your child’s school, you can pay for the full year in advance, most schools offer a 10% discount for fees paid a year in advance.
4. Renovate your home
Renovating your home or one of the rooms in your home will not only bring new life to your house but can potentially increase its value. We all know that this could be an expensive exercise; so the ‘free money’ can go a long way!
5. Start or top up your emergency fund
I can never say this enough, having an emergency fund is so important because you never know when a financial crisis is going to happen, and so it helps mitigate against that risk. Not being prepared financially for a crisis could mean you have to take out loans or go into overdraft, which will certainly set your financial journey back.
Try by all means to save for an emergency fund into a separate savings account either by saving a set amount i.e. R800 or a percentage of your income i.e. 5%/8%
6. Invest in self development , after-all, you are your biggest asset!
No matter which stage of your career you are at, self development is key to getting to the next level, whether it be studying further, putting money aside to finally start your business, signing up for a course or seeing a coach to help you get unstuck, it is all well worth it. Continually investing in yourself is one of the best ways to navigating your career and setting yourself apart from the rest.
7. Buy tickets to go see Beyonce…kidding, not really!
All I am saying is, when done responsibly, the choices/options money bring can be a source of enjoyment. So… if the important things are done and out of the way, it’s time to have some fun! Whether its a weekend getaway, spa day, a trip overseas, do it. Life and money is to be enjoyed!
In the investment world, there are some things that hold truth whether you are a new investor or a seasoned investor. Here are 5 Keys to successful investing across the different asset classes (i.e. Equity, Cash, Property, Bonds)
1. Have a financial road-map/goal
The first key to successful investing is to have a clear financial goal. Ask yourself WHY are you investing? This will inform how long you want to invest and it will dictate the risk you can afford to take. Without a clear goal, you are susceptible to withdrawing your funds and spending it on non-income or interest earning expenditure.
The saying goes, don’t put all your eggs in one basket, and that is what diversification is: spreading your investments across different asset classes thereby spreading the risk you hold. I think this holds even more true in the South African context where our economy has been struggling. So diversification is not only investing across asset classes but investing globally in other countries too.
3. Watch out for those costs!
A lot has been said about compound interest and how it definitely works to your advantage, but most of the time, compounding costs are ignored. I cannot stress how important it is to keep your costs low when investing. This is what John Bogle, the founder and former CEO of Vanguard, an asset management company in the USA said about costs:
“The Tyranny of Compounding Costs. Fees compound over time, just like investment returns. But rather than push the value of portfolios higher over the long run, fees do the exact opposite. …”
4. Understand what you are investing in.
I can never say it enough. Educate yourself, Educate yourself. Yes, professionals are there to guide and give more insight and expert view BUT the onus is on you the investor to know what you are investing in. You are less likely to fall for scams when you prioritize your understanding of investments. Trust me, do yourself a favour and educate yourself.
5. Review your portfolio
As I have said, investing is a long-term game and even though it is, I have seen people adopt an invest and forget type of mindset, they invest and never look at the performance of their investment and track if it will meet their goal.
Reviewing does not mean chopping and changing every time, it merely is to keep track and also a reminder of what you are working towards.
I read a blog post recently that made the distinction very vivid for me the difference between saving and investing, it said: You save to spend; you invest to earn. What steps or keys have worked for you in your investment journey tribe? Where are you investing your money?
Today I want to talk a little bit about marriage and your finances. This topic is inspired by the fact that 3 of my friends will soon be walking down the aisle…exciting!!! While a lot of detail goes into the actual day of the wedding, little to no attention is paid on how the couple will handle their finances once they are married.
From parents to friends, little is spoken about personal finances in a marriage. Couples are left to figure it out themselves in the hope that their love and bliss makes the topic of money easy!
These are some of the topics around money couples should address before they get married:
Marital regime and contracts
I think the first and foremost conversation is the marital contracts, as a couple, you must decide which marital contract you will enter into. Educate yourself and speak to a lawyer to draft your contract for you.
As a couple, you can either get married:
In community of property
Out of community of property with the accrual system
Or out of community of property without the accrual system.
There is nothing more powerful than having someone to share your goals with and see those goals come to pass. When you work on your financial goals together, it becomes a team effort and inevitably, you are each others accountability partners.
Being one another’s accountability partners not only sets the tone of trust when it comes to your finances but creates room for honest and sometimes difficult conversations around money.
Agree on how to split financial responsibilities
Making assumptions and having expectations about what your partner/spouse will do or not do financially can put a strain on the relationship. The best way to deal with this is to have an honest and frank conversation about each others expectations and work backwards to what is reality.
Majority of us do not come from families that discussed money and with this comes pre-conceived ideas of what a man or a woman should do financially…but damnit we all know it doesn’t work that way.
How will you deal with ‘black-tax’?
Black-tax or the ‘sandwich generation’ is a real thing. A lot of millennials are not only supporting their immediate family (i.e. parents and siblings) but also their relatives. This is definitely one area a couple needs to discuss because one is always sure to bail a family member out from time to time and or be it a monthly commitment.
As a couple, you have to decide what works and set boundaries when it comes to family.
Knowing how your partner deals with money helps you mitigate the good and challenging financial times in your relationship.
Your assets and liabilities
I have been in coaching sessions where people are married and yet they do not disclose to one another how much assets or liabilities they have, sometimes one or both partners are heavily indebted and they are married in community of property, so effectively legally they are both indebted! Talking about your assets and liabilities not only helps get a clear picture of your financial situation, but also gives you the opportunity to set goals and work towards financial independence together.
Tribe, I wanna hear your thoughts: how have you handled money in your relationship? What has worked and do you feel you are both working towards the same financial goals?