Tuesday, 18 October 2011 - 20:00
Some Thoughts for Retirement
Coronation recently published their Corolab booklet with quite a few interesting articles that are summarized here.
1. Plan for higher inflation:
Over the last 10 years South Africa mostly experienced low inflation. However, we often feel that our personal inflation rates are a lot higher than the published rate (currently 5.3%). The reason for this is because the 5.3% is the average rate across South Africans’ basket of goods, but each individual’s basket is made up differently. E.g. Recreational equipment had a negative inflation rate of 5% for the past 12 months while electricity stands at 18% and private transport (including petrol) at 17%. Inflation of individual sectors ranges between -5% and +18%, which means your own inflation rate is as personal as your own investment strategy.
It is therefore important to look at your inflation rate and how your investment strategy should be developed to incorporate that.
2. The returns from the last decade versus the longer term history:
The graph below shows the annualised real returns of the last decade relative to long term average returns (last 111 years of data).
Clearly, local assets have done extremely well compared to the longer term averages while offshore equities in rand terms have been dismal. However, if you purely use the returns of the last decade as a proxy of what might happen in the future then you could well be disappointed.
Coronation set out their 10 year forecast of the various asset classes. Naturally these returns don’t materialize in linear format but could be lumpy. From the table below it is clear that the returns from local asset classes could be muted despite a bleaker inflation outlook. It is also evident that history might not repeat itself, with future returns most likely coming from offshore assets.
Coronation makes the point that at a 6% inflation rate you probably require nearly 6 times the level of income at the end of say 25 years to be able to buy the same basket of goods.
This makes it important to invest in growth assets that are able to grow faster than inflation over a longer period.
3. Life expectancy:
Finally, the change in life expectancy because of better healthcare technology could mean that the average person is going to live longer. The table below illustrates the life expectancy of people at certain ages. For example, a female that is currently 65 years old is expected to live a further 20 years (age 85)
Therefore, your personal inflation rate, changes in future returns and life expectancy all influence the investment strategy you need to follow.
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Tue, 18 Oct 2011
U.S. stocks rose on Tuesday as
bank earnings, though unspectacular, were strong enough to
reassure investors about the sector and overshadow debt worries
and. . .
European shares fell on Tuesday,
led by French banking stocks after a Moody's warning about
France's credit rating fuelled worries about possible contagion
in. . .
U.S. shares rose on Tuesday,
buoyed by a jump in financial shares on results from Bank of
America and other big banks, bucking. . .
U.S. stocks rose on Tuesday,
led by financials, as better-than-expected bank earnings
overshadowed new worries about the crisis in Europe, fueled by
a warning. . .
Delta shareholders are referred to the group's unaudited results announcement for the six months ended 27 June 2011 and the comments on prospects contained therein dated 4 August 2011. The group expects its 2011 second half sales revenue and volumes to. . .
In the third quarter of 2011, weaker market conditions and scheduled maintenance during the high electricity tariff winter months, resulted in an operating capacity utilisation of 52%. Ferrochrome production was 18% lower in the third quarter of 2011, compared to the. . .
World Markets (Spot Prices)
|JSE Top 40||17:00||27762.88||-35.43||-0.13%|
|JSE Indust 25||17:00||28061.94||220.41||0.79%|
|Rand / Dollar||19:59||8.0096||0.0277||0.35%|
|Rand / Pound||19:55||12.5415||-0.0030||-0.02%|
|Rand / Euro||19:55||10.9982||0.0259||0.24%|
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|Rand / AUD||19:55||8.1925||0.0667||0.82%|
|Yen / Dollar||19:59||76.8070||-0.0050||-0.01%|
|Euro / Dollar||19:55||0.7278||-0.0001||-0.01%|
|Dollar / Euro||19:58||1.3728||-0.0004||-0.03%|
|Pound / Dollar||19:55||0.6366||0.0016||0.25%|
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The JSE Today
|Index Name||RP||Move||% Move|
|Financial & Ind. 30||30,894.70||124.25||0.40%|
|Oil & Gas ||26,517.44||118.09||0.45%|
|Oil & Gas Producers ||14,257.94||63.50||0.45%|
|Basic Materials ||27,714.19||-310.55||-1.11%|
|Forestry & Paper ||12,137.83||-140.19||-1.14%|
|Industrial Metals ||27,619.66||-530.16||-1.88%|
|General Industrials ||76,901.84||184.87||0.24%|
|Consumer Goods ||29,025.26||154.74||0.54%|
|Automobiles & Parts ||3,725.03||-11.33||-0.30%|
|Health Care ||34,472.03||81.41||0.24%|
|Index Name||RP||Move||% Move|
|Food Producers ||49,820.44||-43.44||-0.09%|
|Personal Goods ||418.48||2.69||0.65%|
|Consumer Services ||54,638.12||745.57||1.38%|
|General Retailers ||44,609.65||722.56||1.65%|
|Travel & Leisure ||3,478.59||-25.28||-0.72%|
|Support Services ||2,253.38||-.70||-0.03%|
|Non-life Insurance ||33,449.20||-21.82||-0.07%|
|Life Insurance ||15,761.55||57.49||0.37%|
|General Financial ||2,105.82||2.41||0.11%|
|SHARIAH TOP40 ||2,974.92||-13||-0.43%|
|FTSE/JSE SHARIAH ALL||3,038.71||-13||-0.43%|
|FTSE JSE Fledgling ||4,476.45||-8||-0.19%|
|FTSE/JSE Alt X ||1,104.84||5||0.42%|
|SA LISTED PROPERTY ||386.02||-0.28%|
|CAPPED PROPERTY ||318.49||-0.44%|
|FTSE/JSE RAFI 40||6,423.99||-8||-0.12%|
|Capped Top 40||14,607.18||-13||-0.09%|
|Capped All Share||15,690.90||-19||-0.12%|
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Latest Consensus Changes**
|NED||NEDBANK GROUP LTD||HOLD||14 Oct|
|SBK||STANDARD BANK GROUP LIMIT...||HOLD||14 Oct|
|AIP||ADCOCK INGRAM HLGS LD||HOLD||14 Oct|
|LHC||LIFE HEALTHCARE GRP HLDG ...||BUY||14 Oct|
|EQS||EQSTRA HOLDINGS LTD||HOLD||14 Oct||
|Expected||Company Name||Fin. Date|
|19 Oct 2011||ANSYS||August 2011 (Interim)|
|19 Oct 2011||MAS||August 2011 (Interim)|
|19 Oct 2011||ODERSON||August 2011 (Interim)|
|19 Oct 2011||PICKNPAY||August 2011 (Interim)|
|19 Oct 2011||PIKWIK||August 2011 (Interim)|
|VLE||Value Group Ltd||18/10/2011||Confirmed|
|AER||Amalgamated Electronic Corporation Ltd||18/10/2011||Confirmed|
|PGR||Peregrine Holdings Ltd||18/10/2011||Confirmed|
|BAU||Bauba Platinum Ltd||19/10/2011||Unconfirmed|
|DST||Distell Group Ltd||19/10/2011||Confirmed||
Stock Exchange News Service
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