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Monthly Archives: December 2017

Tips to Teaching Your Children about Money

However, a panel of experts at The 2016 Money Expo agreed that this is one of the most important subjects any parent has to manage. Preparing your children for their financial futures is one of the greatest gifts you can give them.

Nikki Taylor from Taylored Financial Solutions said that the earlier parents start on this journey, the easier and more effective the lessons will be.

“For me, it’s about starting them early,” said Taylor. “How do you teach children manners? You don’t wait until they are 15. You start when they are really young.”

Brand manager at Emperor Asset Management, Lungile Msibi, said that even two- and three-year olds can appreciate the lessons of delayed gratification and working towards a goal.

“Start kids when they are young with goal-based savings,” she advised. “If they want a Barbie doll, for instance, show how they can save towards that goal. That’s important because later in life they will understand that you can’t invest if you don’t have a goal.”

As they grow older, you will have therefore prepared them for conversations about investing for the long term. It’s particularly helpful if family members support you.

“When my kids were born I gave their grandparents bank account details for both of them and said instead of filling my house with toys at birthdays and Christmas, please put money in these bank accounts,” said Taylor. “My children still get toys and presents, but they also see the money in their accounts and how it is earning interest. They now get excited at every birthday and Christmas to see who has put money in for them and how much they now have.”

It’s also important to involve your children in how you are saving for their own futures through things like education plans or unit trusts that they will receive later in life.

“I’m saving for different stages of my son’s life and he knows what each of those investments are and what they are for,” said Dineo Tsamela, founder of The Piggie Banker. “He gets excited because he can see what that money means for him – that he will have access to a really great education and that he will have some financial security. He appreciates that money is not just about what it can get you now.”

Msibi said that it’s also important to teach children the impact of the choices they make. She used the example of a child who wanted a new iPhone, but his parents offered him the choice of having them invest that money instead.

“The value of an iPhone in one year or two years diminishes,” said Msibi. “But if your child rather invested that R10 000, it could make a huge financial difference later in life if you give it 40 or 50 years to grow.”

It is also crucial that parents instil a sense of where money comes from.

“You have to teach them the value of work,” said Tsamela. “It’s very important for children to understand that money doesn’t just happen – that there are things you have to do for it to come in.”

Taylor agreed.

“If my kids want anything we negotiate how many stars it will cost, and I then allocate them stars for things like good manners or cleaning a room,” she said. “They ask me why they have to get stars when their friends get things for free, and I explain that mommy has to work for everything she earns, and that’s an important conversation. Because it becomes something they have to work towards, they also have to consider whether it’s worth it or whether there is something else they want more instead.”

Crucially, this is also linked to the values we teach our children. And those values are most often conveyed in how we ourselves treat money.

“What value system do you instil in your children through the way you spend your money?” asked Kristia van Heerden, CEO of Just One Lap. “We should think about how we interact with money and what money can do for us.”

Tsamela added that parents have to think about the lessons they are teaching through how they talk about what money is and why it is important.

“Putting the emphasis on saying that you have to be rich, you have to have money distorts children’s view of how the world works,” she said. “Don’t make money the primary thing. What is primary is fulfilment and that you enjoy your life. Everything else comes afterwards.”

Importantly, parents should consider carefully what they teach their children about what it means to be successful.

“Parents need to teach their children about purpose, resilience, following their dreams and pursuing them relentlessly,” said Nonqaba Stamper from FundBabies. “If they help their children to become the best version of themselves, that is when they contribute to society and make South Africa a better place. When they see themselves as people who can add value, that’s where true success lies.”

Tips for Women’s Finance

You need your own will and have to understand the implications of your partner’s estate planning

Chairperson Ronel Williams, says in practice, Fisa often finds that where a woman does not have a lot of assets, or leads a busy life, proper estate planning is neglected.

This could have far-reaching consequences.

Where estate planning is done, it is important to not only consider current circumstances, but to plan for the future, should the situation change, she says.

One example is in cases where a woman’s husband passes away, leaves the bulk of the estate to her and she dies shortly thereafter.

“So then suddenly she does end up with having quite a sizeable estate and her will actually doesn’t reflect the position for her changed financial circumstances.”

She could for example have provided in her will that her estate devolves on her children. If they are still minors (under 18 years) and inherit small amounts, this does not necessarily pose a problem. If, however, her estate is sizeable, the children’s inheritances have to be paid to the Guardian’s Fund unless her will provides for a trust.

While the law allows parties to have a joint will, Fisa usually advises against it, Williams says, mainly for practical reasons. There have been isolated instances where the surviving spouse dies and the Master’s Office battles to trace the original will that also applies to the surviving spouse.

Men and women living together are not automatically treated as ‘married’ under the law in case of intestacy

The Intestate Succession Act applies to every South African who dies without a will and stipulates that the estate should be divided according to a specific formula. If the person was involved in a relationship other than marriage, the type of relationship will determine whether the partner will be allowed to inherit.

Williams says in terms of the Act partners need to be regarded as a “spouse” in order to inherit in the case of intestacy, but the term is not defined in the Act. As a result, other legislation and court cases have to be consulted for an explanation.

Historically, a marriage entered into in terms of the Marriage Act was the only recognised spousal relationship, but with the introduction of the Constitution, the legal system acknowledged that people in other types of relationships were entitled to protection.

Williams says as a start, legislation was passed in the form of the Customary Law of Succession Act and parties to traditional marriages under black customary law are now regarded as spouses when dealing with an intestate estate.

Court cases have also extended the definition of a spouse in this context to include monogamous Muslim and Hindu marriages and polygamous Muslim marriages.

In terms of a Constitutional court ruling, same-sex partners are also regarded as spouses for purposes of intestate succession.

While men and women who live together without getting married often assume that the law treats them as married, this is not necessarily the case.

“Partners in such relationships do not automatically qualify for spousal benefits.”

In terms of a Constitutional court ruling, such partners cannot be regarded as spouses for purposes of intestate succession.


Because the Marriage Act regards marriage as a union between one man and one woman, and same sex couples do not fit the criteria, they were previously not regarded as spouses (before the introduction of the Civil Union Act).

Williams says the Civil Union Act, that came into effect on November 30 2006, allows parties to enter into a civil union, which gives them the same rights as a married couple in terms of the Marriage Act. The Civil Union Act applies to homosexual and heterosexual couples.

“If a same sex couple or heterosexual couple enter into a civil union under the Civil Union Act, they are regarded as married for purposes of the law and they will then also be regarded as a spouse,” she says.

Williams says the current position – the result of a court ruling – is that where a same sex couple live together but have not entered into a civil union in terms of the Civil Union Act, they can inherit from each other when one of the parties dies without a will.

At the time of the court case, the Civil Union Act was not in operation yet, and the court argued that because the parties were not allowed to enter into any type of union to formalise their relationship, they were entitled to protection.

“So it was purely because they didn’t have the option to marry, that the court felt our laws had to protect them.”

But since the Civil Union Act is now in force, should same sex parties still be regarded as spouses if they have the option to enter into a civil union, but choose not to do so?

Williams says because this was a Constitutional Court ruling, the ruling stands.

“So at the moment, if you have same sex parties who did not enter into a civil union and one party dies without having made a will, this court ruling will actually apply and it means they will be regarded as spouses and they will still be protected.”

This is a contentious position, as heterosexual parties who live together but do not enter into a civil union cannot inherit if one party passes away without a will. Since these parties had the option to get married but chose not to do so, the legal position is that they do not need protection.

The introduction of the Civil Union Act puts heterosexual and homosexual groups on equal footing, but because of the Constitutional Court judgment the groups are treated differently for purposes of intestate succession.

“It is one of those matters where we are all waiting for some Constitutional challenge but it just hasn’t happened yet.”

Williams says it is important for heterosexual partners to know the fact that they are living together does not give them protection under the laws of intestate succession.

“Unless they enter into a civil union or get married, they cannot inherit from each other when the other one dies without a will.”

Williams says it is therefore crucial for a woman in such a relationship to ensure she and her partner draft wills to protect one another.

Financial Goals Still Fall Short

The good news is many Americans are planning for the future – with over half making long-term plans. The bad news is what “long-term” means to most Americans.

While 57% of Americans are making long-term plans, most people define “long-term” as just 4.4 years on average, according to a recent New York Life survey.

“It’s surprising to me that 4.4 years would be considered ‘long-term,’ because we generally define long-term financial planning as ten-plus years,” said Justin Richter, senior wealth advisor with Mariner Wealth Advisors.

Richter said a well-structured financial plan must be balanced across all time horizons, requiring trade-offs and careful consideration of a client’s priorities and goals — which is why it’s important to work with an advisor who can take the time to understand these things in order to address both near-term and long-range needs.

“It’s important to convey how short-term decisions may impact long-term goals,” Richter said. “Most people are, by nature, focused on the here and now, so I view it as a significant part of an advisor’s job to help clients keep the big picture in mind. This may mean showing clients how maintaining a certain spending level today could result in the need to push back their retirement age from 60 to 65, for instance.”

Many financial planners agree long-term likely should mean something that takes a look at when someone wants to retire.

“Long-term planning is really different for everyone, but a good point to start is at looking for a retirement date,” said Kevin Ward, president of Park & Elm Investment Advisers in Indianapolis. “By creating a vision for retirement, we can better create a long-term plan of action beyond 4.4 years. This vision for the future can help take action steps in the present to better prepare.”

Ward adds if someone is not sure when he wants to retire, he can work backwards, and figure out what he may want to accomplish with his time.

“Maybe start another business, go back to college, travel, etc.,” he said. “By helping to create the vision, now we can determine the amount of money needed to fund this lifestyle. Creating a plan and action steps now will show exactly when this is achievable.”

Ron Madey, president and chief investment officer of Wealthcare Capital Management, said a long-range plan isn’t for an arbitrary length of time, but refers to planning for your life, from the moment one claims themselves as an independent to the moment they face end of life issues.

“A long-range plan means planning for life events and making adjustments as life unfolds,” Madey said. “The specifics of retirement 30 years from now have a lot less visibility compared to five years from now. Planning for the next 4.4 years of your life is planning for something with high visibility, such as buying a house or getting married — these plans are for relatively near-term, visible and concrete goals.”

Jack Cooney Jr., principal at Bleakley Financial Group in New Jersey, said planning your financial future in four- or five-year slices is a fundamentally flawed way to ensure a comfortable retirement.

“Planning over longer time periods, on the other hand, has many benefits, such as long-term compounded growth of assets, avoiding short-term uncertainty and minimizing the impact of volatility,” he said. “The long-term can be defined as starting today and running through the completion of a person’s longest goal.”

Cooney said what is important is to set financial goals.

“A long-term financial plan should consider a person’s full life expectancy,” he said. “This time period could easily be 50-plus years.”

He continues that many people do not realize that time is a key economic resource that must be managed wisely.

“This will mean that the plan will remain flexible and include contingencies for unexpected life changes,” he adds.

Invest Internationally From the U.S. | How to Do it ?

Four Things to Consider Before You Invest Internationally

1. Local knowledge matters: To best understand the culture, customs, current events, fads and politics of a nation, you need to physically be in the country. Being local will provide the ultimate environment for research and better timing for investing.2. No two markets are alike: Different countries’ markets command different multiples, and investor demand varies. Here are some reasons for this:

  • Monetary and fiscal policy will vary from country to country.
  • Yield curves vary as well.
  • Investment activity is influenced by different groups. For example, in some countries, pension plans play a far greater role in the markets. In other countries, individual investors are a more prominent force.
  • The stage of economic growth (whether the economy is emerging, expanding, mature or contracting) affects the country’s growth and risk outlook. (See”Emerging Markets Are Not a Monolith”.)

3. Companies vary — even within the same industry: An American retailer may be quite different from, say, a Japanese retailer. If you don’t believe that, then compare the shopping experience at Macy’s ( M) with that at Mitsukoshi.4. The impact of foreign exchange (FOREX): When you invest overseas you are investing in two assets: the underlying asset stock or bond and the country’s currency. The changing relationship between countries’ currencies will have an impact on direct investing in a foreign security. I will discuss this in greater detail a little later in this article.Other factors to consider when investing internationally include the global differences in accounting and taxes.

Three Ways to Invest Internationally

Here are three effective ways to invest internationally from within the United States.

1. Country-specific or regional funds:

Through Internet-based “long distance” research, it is far easier to gauge how the broad market will fare in (for example) South Korea or Italy than to do so for individual companies like South Korea-based Samsung or Italy-based UniCredito Italiano.Most countries have a benchmark index like the Nikkei 225 in Japan or the DAX in Germany. In addition, many international investors will use the MSCI set of international indices as guideposts for foreign investing.Once you decide on a country or region to invest in, there are two effective ways to play country funds: exchange-traded funds (ETFs) or closed-end mutual funds.This strategy of understanding and investing in an entire country’s or region’s economy, market or foreign exchange is a less complex and less risky endeavor than taking a more precise position in an individual foreign company.Markets I like, and why:I like Hong Kong and China due to the emergence of capitalism and expansion of infrastructure; Israel as a hotbed for technology and biotechnology; Australia for its overall strong growth, currency and mining industry; South Korea for its tech growth; and Mexico and Brazil for their key roles in expanding Latin American economies.To get exposure to a few of these countries, I own country-specific funds such asFirst Israel Fund ( ISL), iShares Brazil ( EWZ) and iShares South Korea (EWY).When you identify the country or region that you find investment-worthy, remember to research (as always) a few fund “product names” before picking one. As “Busting the Mutual Fund Myth” shows, not all funds are alike.

2. Foreign-based companies:

Given the earlier list of considerations, if you are comfortable investing in individual foreign-based companies, you need to understand how the markets for international stocks work.Foreign stocks are traded on the home-country exchange and referred to as ordinary shares. Ordinary shares are denominated in the home-country currency. Many foreign companies will list their stocks in the United States in securities called American Depository Receipts (ADRs).Here is the catch: there is a formula to convert the price of ordinary shares into that of ADRs. Here it is:ADR Share Price = Ordinary Share Price (x) Conversion Ratio of Ordinary Share Price to ADR Shares (x) Foreign Currency Exchange RateHere is an example:

The price of BHP Billiton (BHP.AX) ordinary shares is AUD (Australian Dollars) 43.10 (1 AUD = 0.875 U.S. Dollars).There are two ordinary shares for every ADR.

Thus, the theoretical price of the BHP Billiton ADR ( BHP) equals:

43.10 x 2 x .875 = $75.43

As you can see the risk in investing in ADRs is multivariate.Also, sometimes there are natural spreads between the ADR and its theoretical price. This is due to supply/demand conditions, conversion fees, arbitrage activity and taxes.All of this adds to the complexity of investing in individual foreign companies.Given my background and experience, I am comfortable holding ADRs. A few I own include China Life ( LFC), the largest insurance company in the largest country,China Mobil ( CHL), the largest mobile carrier in the largest country and Australia-based BHP Billiton, a major global commodities player.

3. U.S. multinational companies:

There is a multitude of American companies that have huge revenue and cash-flow generation from overseas operations. Take for example a company like McDonald’s( MCD), which I own. McDonald’s has roughly 50% of its revenues sourced from international markets.A company’s international business information can easily be obtained in its quarterly earnings releases and annual reports or earnings conference calls. In addition, some companies provide easy-to-read fact sheets or “tear sheets” with operating information on their Web site (look for the “Investor Relations” section).In addition to McDonald’s, my multinational holdings include stocks such asFreeport-McMoRan ( FCX) and Google ( GOOG), both of which have significant international revenue sources.

5 Innovative Finance Products Launched


Developed by financial planning firm Galileo Capital, SmartRand is one of South Africa’s first ‘robo-advisers’. The online service gives anyone, with any amount of money to invest, access to advice and the ability to invest securely through its platform.

SmartRand takes users through a detailed questionnaire that assesses their risk profile and their investment goals before recommending a suitable product for their needs. It currently uses a selection of just five passive fund choices to keep things simple and the costs low.

Just Retirement

With the reform of the pension fund industry a government priority, Just Retirement’s ‘enhanced annuities’ offer potential benefits to anyone with a below average life expectancy. Since the likes of smokers or those with medical conditions have different risk profiles, enhanced annuities can potentially increase their retirement income.

Based on a telephonic questionnaire, Just Retirement assesses an individual’s risk profile and offers them an annuity rate based on that risk. It therefore moves away from the one-size-fits-all approach that is currently the norm.

RMB Krugerrand Custodial Certificates

A first in the world, Krugerrand Custodial Certificates give investors to own Krugerrands while enjoying the liquidity of an exchange. The certificates offer a low cost way to invest and store gold, with the option for investors to take delivery of the physical product if they prefer.

Investment Solutions stokvel funds

Members of stokvels in South Africa currently put between R45 and R50 billion into these organisations every year. However, the systems employed by most financial services companies simply don’t recognise these structures or provide ways for them to use formal savings methods.

Investment Solutions has therefore designed a targeted product offering that recognises stokvels as entities and provides special application forms for their FICA registration. This gives stokvels the opportunity to invest in unit trust-type funds to earn better returns for their members.

Absa Stockbrokers ETF only account

As passive products grow in popularity in South Africa, financial services providers are increasingly looking at ways to make investing in them easier and cheaper. The ETF only account from Absa Stockbrokers does exactly this.

For a brokerage fee of 0.20% per trade and a minimum fee of R20, the platform allows South Africans to invest in any locally-listed ETF at a reduced fee. Particularly for large lump sum investments, this is a very competitive rate.

Risk And Opportunity

 The threat of a downgrade has been hanging over the market for nearly a year, ever since S&P put South Africa on negative watch in December 2015. With the country’s sovereign rating only one notch above sub-investment grade, the next step down would be into ‘junk status’.

This has worried many investors, as the obvious question is what they should be doing with their portfolios. How do they manage the risk of a potential downgrade?

For Ian Scott, the head of fixed income at PSG Asset Management, however, this question should always be asked alongside another: what if South Africa isn’t downgraded? The outcome, he argues, is not guaranteed and therefore investors should be seeing not only the risk, but also the opportunity.

“What’s important to think about is that the downgrade is already reflected in South African bond pricing,” says Scott. “The country’s offshore credit spreads are trading in line with other countries that are already in junk status like Brazil, Russia and Turkey. Nobody knows what the market will do if we are downgraded, and there will probably be a knee-jerk reaction, but a lot of that negative news is already reflected.”

This means that the risks, and therefore the opportunities, may not be the obvious ones.

“The important thing is that a downgrade doesn’t mean a default,” Scott says. “South Africa’s debt metrics by global standards are not that onerous. Our debt-to-GDP ratio is only around 50{fca2e095024080cfdb77550ebe9d0b9b9b8f127e3d2d431587c2923167dcc9e7}, and only 9{fca2e095024080cfdb77550ebe9d0b9b9b8f127e3d2d431587c2923167dcc9e7} to 10{fca2e095024080cfdb77550ebe9d0b9b9b8f127e3d2d431587c2923167dcc9e7} of our debt is offshore. If you look at our peer group, their numbers are way above that.”

He argues that an objective assessment of the country’s fundamentals suggests that there is a low probability that South Africa will default on its debt.

“If you can put the political noise to one side, for our peer group we are still in a good fundamental space,” Scott says. “The possibility that South Africa will not pay its debt is very low. So if you think that we have high yields, a strong capital market, and good banking system, that’s not a bad environment.”

He believes that foreign investors are seeing this opportunity more than locals.

“If this was a country where foreigners felt that they couldn’t be sure of getting their money back, why would they be coming into our market?” Scott asks. “When government recently placed $3 billion in offshore bonds, the placement was three times over-subscribed.

“That doesn’t indicate that foreigners feel that they won’t get their money back over the next ten years,” he says. “Yes, fears around the political situation do make it a much more cloudy situation, but within that is probably where the opportunity lies. We don’t know what will happen, but if you sit in assets that already reflect that negative pricing we think that’s an opportunity.”

Scott therefore warns investors against premising all their decisions on a single outcome. Building a portfolio that assumes that a downgrade is a certainty places you at significant risk.

“There is a big binary danger in having only one view in your portfolio because if that doesn’t materialise it could have a very negative effect if the opposite actually happens,” he says. “You don’t want to take one way directional bets. In the volatile world we live in, that is quite a dangerous thing to do. Diversification in a portfolio is prudent.”

This does mean taking a more nuanced view of risk. The downgrade isn’t the only risk out there, and it may not even be the biggest one.

“Is it that risky to buy government bonds when a downgrade is already reflected in the prices?” Scott asks. “At PSG, we think that when bond yields are low, that’s when you have the biggest risk. When yields are high and there is a lot of fear and uncertainty in the market that is when we see opportunities.”

He points out that last December at the time of Nenegate, ten year government bond yields spiked above 10{fca2e095024080cfdb77550ebe9d0b9b9b8f127e3d2d431587c2923167dcc9e7}. This was a time of great fear in the market. However, PSG saw that as a buying opportunity because a large amount of uncertainty was being priced in.

Plant Power Investing

Low-cost index investing has become a popular approach to achieve market returns and will continue to be used by more individual and institutional investors. On the other hand, sustainable investing is also a growing trend, as more investors recognize that an “all-of-the-above” index investing strategy conflicts with their worldview. Index investors are accepting the status quo by owning companies as they are. Sustainable investors are driving change by using fund managers who engage with companies to adopt positive changes or by simple divestment (i.e. avoid investment in the company or sector).

I envision three groups of individuals who would find plant power investing attractive – vegans, vegetarians and advocates of a healthy eating / living lifestyle (ironically, HE/LL for short). The majority of individuals in this category, however, are not in a position to take on an extraordinary amount of investment risk. Investing in “pure play” meat or egg substitute start-up companies is beyond their financial reach.

The growth in the number of mutual funds that divest from fossil fuels provides an example that plant-based investors might want to follow. Why not simply avoid companies that are in obvious conflict with your worldview? Truth is, there are sufficient large, established companies to choose from in order to develop an investment portfolio that may satisfy both financial and personal goals.

As I point out in my book, Low Fee Vegan Investing, there are currently no mutual funds targeted to plant-based investors. This is unfortunate since, without this option, most investors are not in a position to take on the effort or cost to implement a strategy that would otherwise meet their needs.

I believe there are two easy steps plant-centered investors can take to encourage the development of a suitable investment tool (e.g., mutual fund, plant-based index fund). The first step would be to contact their investment professional and state an interest in having a portfolio which reflects their worldview. If sufficient demand develops, this will be noticed by financial service providers (again, recall what happened with fossil fuel divestment – many mutual funds and ETFs options were developed in a fairly short amount of time). Second, participate in the short “Plant Power Survey” that I developed to start counting the number of plant-based investors interested in this concept and, equally importantly, develop a consumer preference data set that might help the community of portfolio managers generate a set of filters for use until investor demand warrants the expense of more rigorous research.