Property Ownership


A friend of mine called about a week ago, needing help with selling one of his residential properties. I told him, I would make an effort to contact some of my friends and/or associates who might be interested in investing in the property.

During this exercise of trying to find him a buyer, I spoke to a few people and the response I got from all these different people (not related by the way) this was quite an interesting exercise. Although they all agree that owning a piece of property is no doubt a good investment, all things considered, they were also quite reluctant to giving the possible investment deserving thought.

The main reasons they all gave, amongst others, was that they feel property is too risky and you’d be tied up to a long term loan with a bank. Their reasons have some truth in them. But these reasons are outweighed by the potential satisfactory returns that property investors enjoy.

When we were looking to invest in our first property a few years ago, we knew that it could be a risky endeavour should you not due diligence but looking back, it was one of the best decisions that was taken. Of course there are a few hiccups along the way, such as late rental payments, filling up vacancies and of course interest rates.

According to data from ABSA, The first three months of 2016 saw growth in the average value of middle-segment homes in the South African residential property market remaining relatively stable at a nominal 5.7% year-on-year.

According to ABSA, the average nominal value of homes in each of the middle-segment categories was as follows in March 2016:

  • Small homes (80m²-140m²): R937,000
  • Medium-sized homes (141m²-220 m²): R1,255,000
  • Large homes (221m²-400m²): R1,987,000

Over the last 20 years, the average house price has gone up by more than R1 million, meaning quite a handsome return over a period it should take you to pay off your bond.


Image: ABSA

Houses in all three segments have recorded strong growth over the period, with the large cluster showing particularly pleasing growth.

What this shows is that property investment deserves more thought. Risk can be managed, by for one, doing thorough research on possible property investment.

Property investment also requires a long term view.

Which makes the data that came from The FNB Estate Agent Survey is worrying. According to the survey, the average age of the first time property buyer in SA has increased over the past several years to 44 years old, as of 2016. This means most us will reach retirement with a mortgage on our first property. That makes me uncomfortable. Because paying off a mortgage as quickly as possible reaps so many benefits -I stopped counting at a hundred! (Fell asleep actually).

I believe that the younger generation should always be looking for opportunities to invest in property as an alternative investment that will form part of your investment portfolio.

Managing a property investment requires some discipline and savvy financial planning, once you become an owner of property. What I would advise are a few simple but not easy habits for anyone looking to build wealth in the long term;

  1. Pay lump sums off your mortgage: Instead of pocketing your bonus or tax returns, consider putting it directly against the mortgage. Every cent over the outstanding balance eats into your principal amount and reduces the interest payable over the term of the mortgage.
  2. Reduce overspending: Unplanned purchases and impulse spending is our greatest vices! We all do it. It is a habit that needs to be closely monitored and controlled. Tie that thing down, yes you fam!

One of the most common overspending  areas relate to goods and services offered when we are pressed for time (sometimes referred to as impulse purchases), like most of us rush off to work and buying food along the way without checking what we have in the kitchen.

  1. Cast out your debt: Debt destroys your financial momentum. Now you might want to consider paying off those credit cards. Forget extra repayments on your mortgage until you have carved out your high interest debts, such your car loan. Once that is done, you will be amazed at the extra cash you have that may be used to reduce your mortgage.
  2. Sell it instead of dumping it: With Gumtree, OLX and Alibaba being the norm, when thinking about getting rid of some old furniture, rather sell it and make some cash that you can use to reduce your mortgage.

Coping With Cycles – Experienced Voices

“All of investing consists of dealing with the future…and the future is something we can’t know much about. But the limits on our foreknowledge needn’t doom us to failure as long as we acknowledge them and act accordingly…

Knowing where you are in a cycle and what that implies for the future is very different from predicting the timing, extent and shape of the next cyclical move. And so we’d better understand all we can about cycles and their behaviour.” – Howard Marks

Howard Marks is the founder and co-chairman of Oaktree Capital Management, a Los Angeles-based alternative investment firm which he (and his colleague Bruce Karsh) developed into the world’s largest distressed-debt investor.

When it comes to understanding cycles and the ebbs and flows of the marks, he’s your guy as he has seen it all and most importantly he has powered through most of these cycles without losing clients monies or blowing out thanks to his obsession about risk management. There are very few guys like him in the money management industry.


You can’t predict. You can prepare.

Why are you saving?


I have to say, I have got a number of drafts of unfinished blogs on saving techniques for different circumstances including risk taking appetite and ability.
However, I have to admit that I have been unable to finish any of them. The reason for this, I have discovered, is that I felt like there was no firm foundation.

Ever since coming up with the brilliant and very original idea of blogging about investments and the economy, I have been looking for the perfect first post.
After a few months of deliberation, I believe I have struck gold!
As with any undertaking in life, saving and investing yields better results with a goal in mind. And, when it comes to savings, perhaps on a spreadsheet as well. Having a savings goal is particularly helpful when you’re tempted to skip a certain month/week, since you know skipping will result in a shortfall. It…

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Reflections Of a Young Investor

No asset class or investment has the birthright to of a high return. – Howard Marks

I consider myself lucky to have the close friends that I have, they all contributed to my understanding of saving and investing.

The year 2016 was a very informative year with regards to my own savings habits, I had set some very high targets for myself at the beginning of the year and I missed them slightly. I took some time to try figure out what went wrong and I concluded all the costs that got into my way were avoidable – now that I have identified that it’ll help me to combat those costs during 2017.

A very close cousin of mine will start working this February, she wanted advice on a few things such as buying a brand new car or shopping around for a second-hand one, and whether she should get her own place or rent out a flat. I was reluctant to give advise given I had no idea of her short-term, mid-term and long-term goals. However I suggested she starts a goals driven monthly saving plan, even if she starts with a few hundreds and increases that over the years.

She wasn’t really impressed because she thought I had the silver bullet on all things savings/investing (sorry to disappoint you guys but no one person has the sauce doe, we are all learning here!). Howard Marks says it best – no one person, asset class or investment has the birthright to of a high return. 

At the risk of coming across as immodest, myself and my close friends didn’t have a difficult January because we are always making provisions, always putting away something for those rainy days!

May you all have a prosperous year ahead, remember to pay yourself first (automate this process by having a debit order transaction that comes off as you get paid into a savings/investing account) and spend whatever is left over (spend less than you earn and save the difference). Set yourself some realistic targets, use budgeting apps like 22 seven for assistance to track your spending and investing.

Start now, start today, develop the discipline to save and invest while you are young. Make it a habit!

If I can’t convince you maybe the Oracle of Omaha, Warren Buffett can – Chains of habit are too light to be felt until they are too heavy to be broken. 

Word On The Street – Hedge Fund Managers Are Not Your Friend


“When your wealth manager shows up with the next high cost hedge fund (or private equity or infrastructure or real estate fund, for that matter), you need to ask the direct and probing questions. “Precisely, how much do you make?” is a good place to start. Or when a consultant pitches the next high-flying hedge fund, ask some basic questions, like “how did all your prior recommendations fare” or “how much alpha am I paying away in fees.” Pointed questions force a certain level of honesty – even better, ask for answers in writing to avoid any ambiguity. Too much capital in this industry flows to where it’s good for the advisors, not clients – and that needs to change.”

Andrew Beer, How Some Hedge Funds Have Ripped You Off (Barron)

Bad Times Make for Good Buys.

Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family, is credited with saying that “The time to buy is when there’s blood in the streets, even if it is your own.”

He should know. Rothschild made a fortune buying in the panic that followed the battle of Waterloo against Napoleon.-Investopedia

Coming back home and to the present, the social and economic climate do not look positive, an unstable geo-political scene (with Donald J. Trump as the President of the United States), the looming increase in interest rates by the FED, the list goes on and on. One can say that 2016 has been filled with a lot of noise for the investor. Now its 2017 and we press on!

However, I believe that bad times give rise to good buying opportunities in the market. We should get excited when an otherwise good company has a sharp, but undeserved drop in share price. Instead of selling in times like these, you buy some more! Remember the firing of Nhlanhla Nene in December 2015 where they Rand got obliterated and the banking stocks got absolutely hammered? Guess what was one of the best performing sectors in 2016…yes Banking up a cracking 26.2% in a market that was basically flat after dividends.

One of the many important things when it comes to investing is the price you pay for the investment. In fact, this is probably the most important part- The relationship between price and value. It should be the starting point of any investment consideration. Here’s one way to look at at; is it not always a warm, fuzzy feeling to buy that home appliance or your favourite sneakers at a discount when shopping? No need to answer that fam we all know the answer!

The same should apply when you are buying assets that generate a return. The cheaper you buy the product, the more value it shall create for you.

Investing has to be based on reliable estimates of the underlying value of the investment. The level of conviction in the estimate of the underlying value should be great. If there is no conviction, the investor may react irrationally to noise from the market, as a consequence he might lose faith in his investment positions causing him to sell, just when a drop in price should have lead him to increase his position. Thus exposing the investor to destructive exercise of buying high and selling low! Do not be that guy fam!

Of course it is not easy to vary from public opinion, especially during the so-called bearish cycles. It can be quite lonely.

Warren Buffet says this; we simply attempt to be fearful when others are greedy and to be greedy when others are fearful.

It is this sort of unconventional thinking that will bring you investment success. The ability to not panic when everyone is panicking and vice versa. This would mean maintaining unconventional positions against the general consensus.

Howard Marks says it best :

World affairs, economic and corporate performance will rise and fall in cycles. It is a never-ending pendulum that keeps swinging. Market participants also react to these events in a cyclical fashion. Therefore, price swings will usually overstate the swings in the underlying investment. When world events are positive and corporate profits are great, market participants feel good (greedy) and often bid investments at prices that overstate their underlying value. When world events are negative and panicky (fearful) market participants are prone to sell them at overly cheap prices, understating the underlying value of the investment. 

These fluctuations due to world’s events, thus affecting investor behaviour, give rise to assets being sometimes offered at cheap prices and sometimes the prices are too high.

Sir John Templeton puts it quite nicely, Buying when others are despondently selling and selling when others are euphorically buying takes great courage but provides the greatest profit.

Indexing as a core building block for your portfolio

Indexing refers to an investment strategy where you buy a basket of shares all at once using one product and the advantages of this are the extremely low investment costs and the simplicity of the product. Typically these products track an underlying index which tracks certain shares. E.g. The Top 40 index tracks the biggest 40 companies by market share on the Johannesburg Stock Exchange.

Indexing makes sense for the average investor who is not interested in following the markets closely but wants some skin in the game. There are many service providers out there like Sygnia who can help you track the average market returns without having to be a stock market wizard.

I was reading Jack Bogle’s Little Book on Common Sense Investing when I came across the following quote from Jonathan Davis, a columnist for London’s The Spectator:

“Nothing highlights better the continuing gap between rhetoric and substance in British financial services than the failure of providers here to emulate Jack Bogle’s index fund success in the United States.

Every professional in the City knows that index funds should be core building blocks in any long-term investor’s portfolio. Since 1976, the Vanguard index fund has produced a compound annual return of 12 percent, better than three quarters of its peer group.

Yet even 30 years on, ignorance and professional omerta still stand in the way of more investors enjoying the fruits of this unsung hero of the investment world.”

“By periodically investing in an index fund, for example, the know-nothing investor can actually outperform most investment professionals. Paradoxically, when ‘dumb’ money acknowledges its limitations, it ceases to be dumb.”
– Warren Buffett, 1993 Berkshire Hathaway Shareholder Letter


Jack Bogle’s Little Book on Common Sense Investing

1993 Berkshire Hathaway Shareholder Letter