Investment news for you
Well done to Lemeryn, Simone, Jethro, Jordan and Miguel for furthering their studies and passing their exams!
A message from Mark Jurgens
2022 will go down as a challenging year for South Africans and global investors. High
inflation, spiking interest rates, an ongoing war and load shedding are amongst the
difficulties being negotiated. However, the benefits of a strong Reserve Bank and surplus
taxes being generated from local resources, as well as a resilient South African culture, have
softened the blow.
In my fourth and final article relating to Behavioural Finance, I would like to discuss Familiarity Bias. Despite obvious gains from diversification, studies have shown that investors often prefer familiar investments from their own country, region, state or company. Investors prefer domestic investments over international investments. Beyond a geographic familiarity bias, investors also exhibit strong preferences for investing in their employer’s stock. I have met a number of people who have been overconfident with the long-term investment prospects within their company of employment. This can result in not only the risk of poor investment returns, but also potential loss in compensation. Dimension Data and Steinhoff are two examples where employees on all levels lost significant amounts of money when share prices plummeted.
An implication of familiarity bias is when investors hold suboptimal portfolios and suffer from under diversification. Although the best practice is for portfolios to hold at least 50+ stocks, the average investor in this instance, only holds three or four. Focussing on their employer, large capitalisation, and domestic stocks; work against global diversification. To overcome this bias, investors need to cast a wider net.
In my experience, unit trust managers add tremendous value to clients who previously managed their own portfolios based on their limited choices of familiarity. With the amount of unit trusts available today, global diversification is far more attainable than ever before.
One must try to constantly remain aware of behavioural finance influencers and realise the value of independent advice.
I want to take this opportunity of thanking you for your support during a tough year. Volatility creates opportunities, although not always easily identified. Stay well and regards I also want to thank my colleagues at Jurgens Finance for their hard work and commitment. Wishing you and your families safe travels and a happy festive season.
Stay well and regards.
In my fourth and final article relating to Behavioural Finance, I would like to discuss Familiarity Bias. Despite obvious gains from diversification, studies have shown that investors often prefer familiar investments from their own country, region, state or company. Investors prefer domestic investments over international investments. Beyond a geographic familiarity bias, investors also exhibit strong preferences for investing in their employer’s stock. I have met a number of people who have been overconfident with the long-term investment prospects within their company of employment. This can result in not only the risk of poor investment returns, but also potential loss in compensation. Dimension Data and Steinhoff are two examples where employees on all levels lost significant amounts of money when share prices plummeted.
An implication of familiarity bias is when investors hold suboptimal portfolios and suffer from under diversification. Although the best practice is for portfolios to hold at least 50+ stocks, the average investor in this instance, only holds three or four. Focussing on their employer, large capitalisation, and domestic stocks; work against global diversification. To overcome this bias, investors need to cast a wider net.
In my experience, unit trust managers add tremendous value to clients who previously managed their own portfolios based on their limited choices of familiarity. With the amount of unit trusts available today, global diversification is far more attainable than ever before.
One must try to constantly remain aware of behavioural finance influencers and realise the value of independent advice.
I want to take this opportunity of thanking you for your support during a tough year. Volatility creates opportunities, although not always easily identified. Stay well and regards I also want to thank my colleagues at Jurgens Finance for their hard work and commitment. Wishing you and your families safe travels and a happy festive season.
Stay well and regards.
Mark Jurgens
'Let it go, let it go….' from Alan Botha
Human nature allows us to get stuck because we focus on things that are outside of our
control. The more we do this, the more disempowered we are, and the more frustrated or
disappointed or angry or anxious we feel.
In contrast, the more we focus on what is in our control, the more empowered we are, we can do something useful. This year, declining investment markets have evaluated our ability to remain focussed on our end goal, in turn, ease of access to information or misinformation, and social media influencers, have pushed us over the edge. We feel the need to act and do something in the face of this mounting crisis of market despair; ultimately to our detriment in the journey of long-term wealth creation.
While this year may have been challenging for the investment market, it is important to remember that most of what we see, and experience is out of our control. So even though this is tough to absorb, it is important to stay in the moment and understand that we cannot control everything but if we are mindful – that is self-aware, present, engaged in what we are doing, able to let our thoughts and feelings flow through us without getting hooked by them – then we can exert control in these areas. Your own behaviour is the most important thing you can control. If you can master your behaviour, you will certainly succeed as a long-term investor.
In contrast, the more we focus on what is in our control, the more empowered we are, we can do something useful. This year, declining investment markets have evaluated our ability to remain focussed on our end goal, in turn, ease of access to information or misinformation, and social media influencers, have pushed us over the edge. We feel the need to act and do something in the face of this mounting crisis of market despair; ultimately to our detriment in the journey of long-term wealth creation.
While this year may have been challenging for the investment market, it is important to remember that most of what we see, and experience is out of our control. So even though this is tough to absorb, it is important to stay in the moment and understand that we cannot control everything but if we are mindful – that is self-aware, present, engaged in what we are doing, able to let our thoughts and feelings flow through us without getting hooked by them – then we can exert control in these areas. Your own behaviour is the most important thing you can control. If you can master your behaviour, you will certainly succeed as a long-term investor.
Out of your control:
The Economy
In the grand scheme of things, our spending has little to no impact on the economy. We have zero influence with the Reserve bank or interest Rates, and our purchases of items like mobile phones or cars have almost no impact on corporate earnings or market volatility. Despite all this, you still contribute to inflation everyday, simply by spending your money.
The Markets
No matter how much you might try to control the markets, they will always be unpredictable and seemingly out of your reach. Even if you had billions of rands at your disposal, it would still be impossible to influence the trillion-rand/dollar marketplaces. They operate on their own, unaffected by those who inhabit them. Markets are always looking ahead and pricing in good and unwelcome news, long before we can react to positive or negative price movements. A proven strategy is to always take a long-term view and you will always be well rewarded.
In your control:
Your financial planning and investment portfolio
Constructing a financial plan that will help you weather recessions, market volatility and
drawdowns.You need something you can live with, something that is tailored to your risk tolerance and has
achievable goals. The asset allocation and diversification in your plan should reflect this.
Additionally, we need to ensure that you know where you are headed and how well you are doing
along the way. This includes building towards and in retirement. You can control your financial
destiny by living within your means and making wise choices about your behaviour, taxes, fees,
and expenses. Reading too much negative news can affect your outlook in a destructive way, so
be selective about the news sources you consume.
Conclusion
If we are on autopilot, being spun around by our thoughts and feelings, we are not likely to be able
to exert control in these areas. But if we are mindful – that is self-aware, present, engaged in what
we are doing, able to let our thoughts and feelings flow through us without getting hooked by
them – then we can exert control in these areas. Your own behaviour is the most important thing
you can control. If you can master your behaviour, you will certainly succeed as a long-term
investor.
Short Term News Update - Greg Brits
INSTALLING SOLAR PANELS
With South Africa’s struggling power grid, many consumers are finding alternatives to best
serve their households and businesses. The installation of solar panels has become very
popular, however, from an insurance perspective, we would like to point out a few very
important considerations when the panels are installed on a pitched roof.
• Identify accredited manufacturers and installers who have many years of experience in this
• Check with your installer, in writing, that your roof can withstand the additional load bearing
• Following the above point, ensure that your installer has a Contractors All Risk Policy that is valid and active. Damages to your roof, tiles, gutters etc., may not necessarily constitute a claim via your Insurer as the contractor caused the damage. This would also apply to flat roof was not designed to accommodate the extra weight. field. This also means that the warranty periods are greater, which works in your favour. weight. This is vitally important as Insurers may repudiate a claim based on the fact that the roofs as damage may be caused to your waterproofing. INSTALLING SOLAR PANELS
• A COC (certificate of compliance) must be issued upon completion of the installation. This also applies to upgrades of an existing solar system if you decide to do so.
• Remember to notify us of the replacement value for the solar system, as your building sum insured will more than likely need to be increased. In the event that you rent premises or are the tenant of business premises, you do have the option to insure the system on an All-Risks basis.
• Identify accredited manufacturers and installers who have many years of experience in this
• Check with your installer, in writing, that your roof can withstand the additional load bearing
• Following the above point, ensure that your installer has a Contractors All Risk Policy that is valid and active. Damages to your roof, tiles, gutters etc., may not necessarily constitute a claim via your Insurer as the contractor caused the damage. This would also apply to flat roof was not designed to accommodate the extra weight. field. This also means that the warranty periods are greater, which works in your favour. weight. This is vitally important as Insurers may repudiate a claim based on the fact that the roofs as damage may be caused to your waterproofing. INSTALLING SOLAR PANELS
• A COC (certificate of compliance) must be issued upon completion of the installation. This also applies to upgrades of an existing solar system if you decide to do so.
• Remember to notify us of the replacement value for the solar system, as your building sum insured will more than likely need to be increased. In the event that you rent premises or are the tenant of business premises, you do have the option to insure the system on an All-Risks basis.
HOLIDAY TIPS
The holiday season brings its own challenges with regards to safety on our roads but also the
crime aspect when your home is unoccupied. Here are a few tips to remember:
• Test and service your alarm system to ensure that battery back-ups and all required zones are fully operational.
• Clear your post-box as thieves monitor activity at residences. A full post-box means no one is at home.
• Leave a spare set of keys with a neighbour or family member in case of emergencies.
• Switch off unnecessary appliances which won’t be in use whilst on holiday, namely geysers or gas supplies.
• Where possible, switch off the water supply to the home to avoid unnecessary pressure build up should a pipe leak or burst.
• Ensure your electric fence is fully operational.
We would like to take this opportunity to thank all our loyal clients for your continued support during 2022. We wish you and your families a blessed Christmas and prosperous New Year, may your holiday season be filled with love and memorable occasions. Should you have any questions with regards to solar installations and your Insurers requirements, please do not hesitate to contact our office.
Best Regards and Merry Christmas,
Jurgens Insurance Brokers Team
• Test and service your alarm system to ensure that battery back-ups and all required zones are fully operational.
• Clear your post-box as thieves monitor activity at residences. A full post-box means no one is at home.
• Leave a spare set of keys with a neighbour or family member in case of emergencies.
• Switch off unnecessary appliances which won’t be in use whilst on holiday, namely geysers or gas supplies.
• Where possible, switch off the water supply to the home to avoid unnecessary pressure build up should a pipe leak or burst.
• Ensure your electric fence is fully operational.
We would like to take this opportunity to thank all our loyal clients for your continued support during 2022. We wish you and your families a blessed Christmas and prosperous New Year, may your holiday season be filled with love and memorable occasions. Should you have any questions with regards to solar installations and your Insurers requirements, please do not hesitate to contact our office.
Best Regards and Merry Christmas,
Jurgens Insurance Brokers Team
May your holidays sparkle with moments of love, laughter, and goodwill, and may the year ahead be full of contentment and joy.
Quote of the day :
We are extrapolating machines in a world where nothing too good or too bad lasts indefinitely.