The Jurgens team were enthusiastic about participating in the May elections, eager to make their mark. Now that the dust has settled and positions have been filled, we remain optimistic about the future of our country!
Message from Mark Jurgens
Good day
There seems to be a lot of positivity post our elections. Let’s hope the GNU delivers a better South Africa for all of us. Yes, there will be issues and conflict between parties, but it forms a basis for better management and stricter compliance going forward.
I wanted to discuss the changing environment as far as long-term asset allocation is concerned. The trend was to always invest as much as possible into equity funds to achieve maximum returns. Exposure to Alternative investments have added meaningful value to portfolios over the last few years, referring to financial assets that do not fall into the traditional categories of stocks, bonds or cash. They include a diverse range of investment opportunities such as Structured products, Private equity, Hedge funds and Structured debt, which have proven to add plenty of value.
These investments are providing competitive returns, in some instances better than pure equity portfolios. As an example, one can presently earn 8.5% annually in Sterling through an asset backed structured debt vehicle. Private equity portfolios have achieved double digit returns in USD over the last 5 years but require a longer investment horizon. Our preferred hedge funds in SA are also achieving consistent returns, and the correct exposure has proven to reduce overall risk.
As independent advisors we have access to many alternative investment providers, all specialising in different areas.
1. Structured products – investment solutions that combine one or more underlying assets (e.g. shares, bonds, stock indexes) with a derivative component. They can be used to bank on different market scenarios. That way, you can earn a positive return even when the markets trend sideways. Structured products can offer capital preservation and limit downside risk, in a selected investment term.
2. Private equity – access to high growth unlisted companies, potential for double digit returns in USD and have a slightly longer-term investment horizon.
3. Hedge funds – advanced strategies to hedge risk and benefit from bear markets. Hedge fund managers have freer rein to invest in a wide variety of assets and to use bolder strategies in pursuit of higher profits.
4. Structured debt – earning high yields from asset backed finance in the informal market. (Current yield of 8,5% in Sterling)
5. Commodities – investing in agricultural products for example, where demand is driven by economic and geopolitical factors. (recent increase in the price of cocoa created profitable opportunities)
6. Collectables – Art, antiques, rare coins and classic cars have proven extremely successful.
These investments often have low correlation with traditional asset classes, which helps reduce overall portfolio volatility. In 2022 listed equities had a tough year, providing negative returns. Many of the alternative opportunities gave positive returns over the same period.
Alternatives offer varying degrees of risk, dependant on the investors’ appetite, although many focus on capital preservation. They do require an investment horizon of at least 5 years and come with lower liquidity availability. In many instances fees are also higher, although one needs to focus on the net return.
Alternative Investments can enhance a portfolio, but require careful consideration of individual needs, risk tolerance and goals. We encourage you to contact our offices to discuss this further.
There seems to be a lot of positivity post our elections. Let’s hope the GNU delivers a better South Africa for all of us. Yes, there will be issues and conflict between parties, but it forms a basis for better management and stricter compliance going forward.
I wanted to discuss the changing environment as far as long-term asset allocation is concerned. The trend was to always invest as much as possible into equity funds to achieve maximum returns. Exposure to Alternative investments have added meaningful value to portfolios over the last few years, referring to financial assets that do not fall into the traditional categories of stocks, bonds or cash. They include a diverse range of investment opportunities such as Structured products, Private equity, Hedge funds and Structured debt, which have proven to add plenty of value.
These investments are providing competitive returns, in some instances better than pure equity portfolios. As an example, one can presently earn 8.5% annually in Sterling through an asset backed structured debt vehicle. Private equity portfolios have achieved double digit returns in USD over the last 5 years but require a longer investment horizon. Our preferred hedge funds in SA are also achieving consistent returns, and the correct exposure has proven to reduce overall risk.
As independent advisors we have access to many alternative investment providers, all specialising in different areas.
1. Structured products – investment solutions that combine one or more underlying assets (e.g. shares, bonds, stock indexes) with a derivative component. They can be used to bank on different market scenarios. That way, you can earn a positive return even when the markets trend sideways. Structured products can offer capital preservation and limit downside risk, in a selected investment term.
2. Private equity – access to high growth unlisted companies, potential for double digit returns in USD and have a slightly longer-term investment horizon.
3. Hedge funds – advanced strategies to hedge risk and benefit from bear markets. Hedge fund managers have freer rein to invest in a wide variety of assets and to use bolder strategies in pursuit of higher profits.
4. Structured debt – earning high yields from asset backed finance in the informal market. (Current yield of 8,5% in Sterling)
5. Commodities – investing in agricultural products for example, where demand is driven by economic and geopolitical factors. (recent increase in the price of cocoa created profitable opportunities)
6. Collectables – Art, antiques, rare coins and classic cars have proven extremely successful.
These investments often have low correlation with traditional asset classes, which helps reduce overall portfolio volatility. In 2022 listed equities had a tough year, providing negative returns. Many of the alternative opportunities gave positive returns over the same period.
Alternatives offer varying degrees of risk, dependant on the investors’ appetite, although many focus on capital preservation. They do require an investment horizon of at least 5 years and come with lower liquidity availability. In many instances fees are also higher, although one needs to focus on the net return.
Alternative Investments can enhance a portfolio, but require careful consideration of individual needs, risk tolerance and goals. We encourage you to contact our offices to discuss this further.
Stay well and regards
Mark
Mark
‘The Power of Quiet Compounding in Accumulating Wealth’ from Alan Botha
In the realm of personal finance and wealth accumulation, the concept of compounding often takes centre stage. However, within this broader notion lies a more nuanced and less discussed phenomenon known as “quiet compounding.” This approach, characterised by consistent, understated growth and disciplined financial habits, holds the key to substantial long-term wealth accumulation. Understanding quiet compounding requires appreciating the subtleties of patience, discipline, and the long-term perspective it demands.
The Essence of Compounding
To grasp the essence of quiet compounding, it is crucial to first understand the fundamental principle of compounding itself. Compounding occurs when the returns on an investment generate earnings, and those earnings, in turn, generate more earnings. This creates a snowball effect where the growth becomes exponentially larger over time. The power of compounding is best illustrated by the example of investing a small amount regularly over an extended period. For instance, investing R100 a month with an average annual return of 8% can grow to over R150,000 in 30 years.
The Quiet Approach
Quiet compounding emphasises steady and consistent financial behaviours rather than chasing high-risk, high-reward opportunities. This approach requires a mindset shift from seeking immediate gains to valuing long-term growth. One of the foundational principles of quiet compounding is living below ones means. By spending less than you earn and investing the difference, you set the stage for your money to grow quietly and steadily.
The Role of Patience and Discipline
Quiet compounding thrives on patience and discipline. The allure of quick profits can be tempting, but true wealth accumulation through quiet compounding demands resisting this urge. It involves sticking to a well-thought-out financial plan, even when market conditions are volatile or when other investment opportunities seem more lucrative. This disciplined approach ensures that you do not disrupt the compounding process by making impulsive decisions.
The Impact of Consistency
Consistency is a cornerstone of quiet compounding. Regularly contributing to investment accounts, such as retirement funds or diversified portfolios, ensures that the compounding effect remains uninterrupted. Automatic contributions to investment accounts can help maintain this consistency, making it easier to stick to your financial goals without the need for constant monitoring and decision-making.
Diversification and Risk Management
An often-overlooked aspect of quiet compounding is the role of diversification and risk management. By spreading investments across a variety of asset classes, you reduce the impact of any single investment’s inferior performance on your overall portfolio. This risk management strategy helps maintain the steady growth essential for quiet compounding. It is about finding a balance between risk and return, ensuring that your investments continue to grow steadily without exposing you to unnecessary risks.
The Long-Term Perspective
Quiet compounding requires a long-term perspective. It is not about making a quick fortune but about building sustainable wealth over decades. This perspective helps investors stay focused during market downturns and resist the urge to make hasty decisions based on short-term market fluctuations. Understanding that wealth accumulation is a marathon, not a sprint, is crucial for embracing the quiet compounding approach.
Avoiding the Pitfalls of Comparison
One of the biggest challenges in embracing quiet compounding is resisting the urge to compare oneself to others. In today’s age of social media, it is easy to become envious of others’ apparent financial success and feel pressured to emulate their investment strategies. However, quiet compounding necessitates a focus on personal financial goals and discipline. Comparing oneself to others can lead to impulsive decisions and derail the steady progress that quiet compounding fosters.
Real-Life Examples
Warren Buffett, one of the most successful investors of all time, is a prime example of quiet compounding in action. His wealth was not accumulated overnight but through decades of disciplined investing and a long-term perspective. Buffett’s strategy of investing in fundamentally sound companies and holding onto them for the long haul exemplifies the power of quiet compounding. Consider the story of Grace Groner, a secretary who worked for Abbott Laboratories for 43 years. She purchased three shares of Abbott stock in 1935 for $60 each. By reinvesting the dividends and holding the stock for over seven decades, her investment grew to over $7 million by the time of her death in 2010. Groner’s story is a testament to the power of quiet compounding and the impact of long-term, disciplined investing. Another example is Ronald Read, a janitor and gas station attendant who amassed an $8 million fortune through quiet compounding. Read invested in high-quality dividend-paying stocks and held them for decades. His frugality, consistent investing, and long-term perspective allowed him to quietly build substantial wealth without drawing attention.
Conclusion
The journey of quiet compounding may be understated and gradual, but its results are profound, proving that true wealth is built quietly and steadily. By focusing on personal financial goals and avoiding the pitfalls of comparison, individuals can stay on course and realise the full potential of quiet compounding.
The Essence of Compounding
To grasp the essence of quiet compounding, it is crucial to first understand the fundamental principle of compounding itself. Compounding occurs when the returns on an investment generate earnings, and those earnings, in turn, generate more earnings. This creates a snowball effect where the growth becomes exponentially larger over time. The power of compounding is best illustrated by the example of investing a small amount regularly over an extended period. For instance, investing R100 a month with an average annual return of 8% can grow to over R150,000 in 30 years.
The Quiet Approach
Quiet compounding emphasises steady and consistent financial behaviours rather than chasing high-risk, high-reward opportunities. This approach requires a mindset shift from seeking immediate gains to valuing long-term growth. One of the foundational principles of quiet compounding is living below ones means. By spending less than you earn and investing the difference, you set the stage for your money to grow quietly and steadily.
The Role of Patience and Discipline
Quiet compounding thrives on patience and discipline. The allure of quick profits can be tempting, but true wealth accumulation through quiet compounding demands resisting this urge. It involves sticking to a well-thought-out financial plan, even when market conditions are volatile or when other investment opportunities seem more lucrative. This disciplined approach ensures that you do not disrupt the compounding process by making impulsive decisions.
The Impact of Consistency
Consistency is a cornerstone of quiet compounding. Regularly contributing to investment accounts, such as retirement funds or diversified portfolios, ensures that the compounding effect remains uninterrupted. Automatic contributions to investment accounts can help maintain this consistency, making it easier to stick to your financial goals without the need for constant monitoring and decision-making.
Diversification and Risk Management
An often-overlooked aspect of quiet compounding is the role of diversification and risk management. By spreading investments across a variety of asset classes, you reduce the impact of any single investment’s inferior performance on your overall portfolio. This risk management strategy helps maintain the steady growth essential for quiet compounding. It is about finding a balance between risk and return, ensuring that your investments continue to grow steadily without exposing you to unnecessary risks.
The Long-Term Perspective
Quiet compounding requires a long-term perspective. It is not about making a quick fortune but about building sustainable wealth over decades. This perspective helps investors stay focused during market downturns and resist the urge to make hasty decisions based on short-term market fluctuations. Understanding that wealth accumulation is a marathon, not a sprint, is crucial for embracing the quiet compounding approach.
Avoiding the Pitfalls of Comparison
One of the biggest challenges in embracing quiet compounding is resisting the urge to compare oneself to others. In today’s age of social media, it is easy to become envious of others’ apparent financial success and feel pressured to emulate their investment strategies. However, quiet compounding necessitates a focus on personal financial goals and discipline. Comparing oneself to others can lead to impulsive decisions and derail the steady progress that quiet compounding fosters.
Real-Life Examples
Warren Buffett, one of the most successful investors of all time, is a prime example of quiet compounding in action. His wealth was not accumulated overnight but through decades of disciplined investing and a long-term perspective. Buffett’s strategy of investing in fundamentally sound companies and holding onto them for the long haul exemplifies the power of quiet compounding. Consider the story of Grace Groner, a secretary who worked for Abbott Laboratories for 43 years. She purchased three shares of Abbott stock in 1935 for $60 each. By reinvesting the dividends and holding the stock for over seven decades, her investment grew to over $7 million by the time of her death in 2010. Groner’s story is a testament to the power of quiet compounding and the impact of long-term, disciplined investing. Another example is Ronald Read, a janitor and gas station attendant who amassed an $8 million fortune through quiet compounding. Read invested in high-quality dividend-paying stocks and held them for decades. His frugality, consistent investing, and long-term perspective allowed him to quietly build substantial wealth without drawing attention.
Conclusion
The journey of quiet compounding may be understated and gradual, but its results are profound, proving that true wealth is built quietly and steadily. By focusing on personal financial goals and avoiding the pitfalls of comparison, individuals can stay on course and realise the full potential of quiet compounding.
Quote of the Day
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
Short Term News Update from Greg Brits
With winter upon us, it’s time to make good use of those heaters and fireplaces that have been in hibernation since last year.
One of the biggest talking points this year has been our National Elections, which has now come and gone, however some analysts did predict that the ruling party would drop below the 50% mark for the first time since 1994, which is exactly what happened. I’m sure that we would all like to see positive changes in South Africa moving forward, as we do have a beautiful country with so many cultural diversities.
In this quarterly newsletter edition, we have detailed a few valuable points below that will assist and guide you in a better understanding of your short-term insurance policy.
• Before the storms and rains return in a few months’ time, winter is the perfect opportunity to carry out general maintenance on your home and/or business premises. Clean out gutters, check waterproofing on pitched or flat roofs, fell tree’s that have overgrown, and check for any rising damp which may have occurred to walls inside or outside of your building, including boundary walls. Wear and Tear or gradual deterioration is not covered by Insurance Companies, and hence it’s vitally important to maintain your property.
• When surveys are conducted at your premises, it remains a priority that the Risk Improvements imposed by your Insurer are attended to in the allocated time frame. If you fail to meet the deadline, Insurers will exclude cover on the risk improvement areas detailed in the report. If you are unable to complete these improvements in the given time frame, please liaise with our office soonest.
• Power Surge Protection in your home or business remains a priority for Insurers. Some Insurers exclude cover or charge far higher excesses should you not have this protection in place. Please contact us for further advice.
• Solar systems also remain a concern with the focus on using accredited installers. The industry has seen a number of fire losses due to incorrect installations or inferior materials used. It is for this very reason that a COC (certificate of compliance) is issued upon completion of the installation, which is compulsory for cover to remain embedded. It is also important to note that solar systems are not automatically covered under your building insurance, and therefor need to be noted or specified on your policy. Please also insist that the installer has a valid Contractors All Risks policy.
• We urge all our clients to please notify us immediately if your property will be vacant or unoccupied for longer than 30 days, whether leased or not. It is a condition in your contract of insurance, to notify Insurers of this material change.
• It is important to understand that any material change during the life span of your policy be communicated to your Insurer, which includes your financial soundness. Blacklisting such as Judgements, Payment Defaults, Insolvency and Debt Review need to be disclosed. Often this information is not disclosed to insurers.
We would like to take this opportunity to thank all our clients for your continued support in 2024.
Should you have any questions with regards to the above points, please do not hesitate to contact our office telephonically or by email.
Best Regards
Jurgens Insurance Brokers Team
One of the biggest talking points this year has been our National Elections, which has now come and gone, however some analysts did predict that the ruling party would drop below the 50% mark for the first time since 1994, which is exactly what happened. I’m sure that we would all like to see positive changes in South Africa moving forward, as we do have a beautiful country with so many cultural diversities.
In this quarterly newsletter edition, we have detailed a few valuable points below that will assist and guide you in a better understanding of your short-term insurance policy.
• Before the storms and rains return in a few months’ time, winter is the perfect opportunity to carry out general maintenance on your home and/or business premises. Clean out gutters, check waterproofing on pitched or flat roofs, fell tree’s that have overgrown, and check for any rising damp which may have occurred to walls inside or outside of your building, including boundary walls. Wear and Tear or gradual deterioration is not covered by Insurance Companies, and hence it’s vitally important to maintain your property.
• When surveys are conducted at your premises, it remains a priority that the Risk Improvements imposed by your Insurer are attended to in the allocated time frame. If you fail to meet the deadline, Insurers will exclude cover on the risk improvement areas detailed in the report. If you are unable to complete these improvements in the given time frame, please liaise with our office soonest.
• Power Surge Protection in your home or business remains a priority for Insurers. Some Insurers exclude cover or charge far higher excesses should you not have this protection in place. Please contact us for further advice.
• Solar systems also remain a concern with the focus on using accredited installers. The industry has seen a number of fire losses due to incorrect installations or inferior materials used. It is for this very reason that a COC (certificate of compliance) is issued upon completion of the installation, which is compulsory for cover to remain embedded. It is also important to note that solar systems are not automatically covered under your building insurance, and therefor need to be noted or specified on your policy. Please also insist that the installer has a valid Contractors All Risks policy.
• We urge all our clients to please notify us immediately if your property will be vacant or unoccupied for longer than 30 days, whether leased or not. It is a condition in your contract of insurance, to notify Insurers of this material change.
• It is important to understand that any material change during the life span of your policy be communicated to your Insurer, which includes your financial soundness. Blacklisting such as Judgements, Payment Defaults, Insolvency and Debt Review need to be disclosed. Often this information is not disclosed to insurers.
We would like to take this opportunity to thank all our clients for your continued support in 2024.
Should you have any questions with regards to the above points, please do not hesitate to contact our office telephonically or by email.
Best Regards
Jurgens Insurance Brokers Team
In June, Mark and Alan attended the Ninety One annual investment conference in London.
Pictured above with some colleagues from Anchor Capital.
From the left, David Te Brake (Wealth Management), Alan Botha, Mark Jurgens and Brendan Gace (Head of Anchor Private Clients).
