Where's the best place to invest your money right now?

by , 04 October 2018
Where's the best place to invest your money right now?
“Francois, where should I take my money? ‘They' tell me to take as much as possible offshore right now. Is that the right place to invest?”

With the three year return on the JSE sitting at a grand total of 9.49% many investors are asking me whether it is still relevant investing in the JSE.


Perhaps investing everything, or at least as much as possible offshore is more prudent?

So let’s have a look at what’s the best investment route for you right now.

 

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Where you should put your investment money today


This takes me back to 2014.

Between 29 July and 15 October, 2014, the JSE All Share Index crashed 11.17% from 52,188 points to 46,358 points.

Back then investors were fearful. And at the FSPInvest Symposiumof 2014 many people asked the panelists whether investing the bulk of their wealth in offshore shares was a good idea.

Had you invested your cash in a JSE All-Share tracking fund it would’ve returned at least 43% between that day and November 2017.

At the same time offshore index funds tracking the MSCI UK index returned 24.52%. So, your offshore investment (even after the rand weakening) still missed out against local shares.

The fact of the matter is that whilst going offshore seems attractive it also shouldn’t make up the entirety of your investment portfolio.

Our answer to investors in 2014 was the same as I am going to tell you today.

The answer is diversification.

Instead of putting all your money in South Africa – or all of it offshore – you should split it between different countries and asset classes.

That means you shouldn’t only own shares.

 

My easy rule of thumb diversification strategy

 

What you should do is split your portfolio in FOUR.

That is 25% in four different investment types. Let me explain:

 

Investment class #1: Local shares
 

We all know local shares – Those are the the ones linked to the South African economy and trading on the JSE. Whilst political uncertainty and our struggling economy is negative – the fact is there have been naysayers for so many years… In 1994 people expected SA to go into a civil war. In 1997/1998 the emerging market crisis had the JSE and our currency really struggling. And in 2008 the global financial crisis sent the JSE spiraling into an abyss. But still it emerged as one of the best performing stock markets after these times of uncertainty. If you plan on retiring in SA it is a MUST for you to invest at least 25% of your portfolio in shares that will likely track South African inflation.
 

Investment class #2: Offshore shares
 

We all know that because of SA’s high level of imports and other economic factors the rand continues to lose ground against the dollar year after year.

That’s mainly why you want to invest in offshore stock markets.

That and the fact that some of the world’s largest and most innovative businesses are global. And that gives you a lot of certainty about the safety of your investments in the long run.

An easy way to do this is to invest in an index tracking fund like the Sygnia MSCI World ETF – which tracks an index of the world’s largest companies. It is also a listed ETF on the JSE. So, you don’t need to struggle taking your money offshore. Simply invest it in a local based offshore fund.

Your investment fees will most probably be much lower than when investing in individual offshore shares – and the hassle will be a lot less!

 
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Investment class #3: Cash and near-cash investments
 

You don’t want all of your money to be exposed to shares – and the voltatility they hold. But instead of putting your money in a fixed deposit you can get higher returns.

I still like the Government Retail Bond.

Right now, you can get a 8.25% annual rate on it for a 2 year fixed period. If you’re willing to invest for 5 years you can get an annual rate of 9.25% on it. That means a five-year return of 55.6%.

Now that won’t make you rich. But it is a very satisfying return considering the low risk with a government bond – when compared to shares.

 

Investment class #4: Alternative investments
 

Alternative investments include everything from commodities and coins such as golden Kruger rands, to property, crypto-currencies and art.

I prefer property to start out with in the ‘alternative’ investment sphere.

Then, you take your rental income from properties and invest that into gold and other investments.

Splitting your investment portfolio up like this means that no matter what cycle the market goes through you will get decent returns.

The fact is trying to time the market to switch between different asset classes through each cycle more often ends up in high trading costs and missed opportunities.

Here’s to unleashing real value

Francois Joubert
Editor, Red Hot Penny Shares

PS. If you’re looking for some great local shares, then
 I highly recommend you take a look at these three local stocks right now.
 




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