Tuesday, 31 January 2012 - 20:00
Charts
The Power of Reinvesting The All Share Index (ALSI) closed at an all time high on 17 January to much fanfare from market commentators and investors alike. Simplistically put, R100 invested into the ALSI (excluding the impact of all costs) at its peak on 22 May 2008 would only have risen back to the R100 level on the 17th, having been ‘underwater’ for the past 3 years and 8 months.
Importantly this index only looks at price movements of the constituent shares and doesn’t include the effects of dividends paid out. Savvy investors that reinvested their dividends would have gained parity in November 2010, and the R100 investment in May 2008 would now be worth R112. The chart below shows the difference between the ALSI (dividends paid out) and the ALSI Total Return (dividends reinvested) since the peak rebased to 100.
Some investors take their dividends (the yield has averaged just under 3% over the past 10 years) and use it for discretionary spending, some use it to fund their living expenses (particularly those using their dividends to fund their retirement), and others reinvest their dividends until they retire.
Naturally investors in retirement require their dividends, but for those investors that don’t need their dividends the decision to reinvest or pay out for consumption (i.e. spent on ‘wants’ and not ‘needs’) can produce quite a large difference in the final amount invested in the market over time.
For the purpose of this article we’ll take a look at two hypothetical investors:
• Investor A
o Sold his business for R1 000 000 and invested it in the stock market.
o Started working at Company XYZ and lived off his salary.
o Reinvested dividends consistently as they were paid out.
o Worked at XYZ for 10 years before retiring.
• Investor B
o Sold his business for R1 000 000 and invested it in the stock market.
o Started working at Company XYZ (same job and pay as Investor A) and lived off his salary.
o Used dividends paid out as a ‘bonus’ which were spent on overseas trips and luxury electronics.
o Worked at XYZ for 10 years before retiring.
At retirement we now have two investors who need to make lifestyle decisions based on the income they can generate in their retirement years. The difference in savings between the two investors is actually quite staggering. The chart below shows what would have happened based on returns generated and dividends paid out of the ALSI over the past 10 years:
Investor A would have saved up R4.1 million versus Investor B’s R3.1 million, a full R1 million difference and as such Investor A will be able to receive an income all the way through retirement that is more than 33% higher than Investor B (if both live off the same drawdown percentage – i.e. the same investment risk).
It is apparent from this report that seemingly innocuous decisions can have such dramatic differences if repeated over an extended period. The gap between the two investors would be significantly wider (both in percentage and rand terms) the longer the investment horizon. It is therefore critical for those investors that are 20 / 30 / 40 years from retirement to keep reinvesting all proceeds in order to take advantage of the 8th Wonder of the World – Compounding.
All the best for 2012 from the team at Seed Investments, may it be prosperous in all respects!
Take care,
Mike Browne
021 9144 966
info@seedinvestments.co.za
www.seedinvestments.co.za
Tue, 31 Jan 2012
Top News
Month-end window dressing help boost South African stocks to their best January performance in six years, as unit trusts and hedge funds loaded up on rising shares to bolster their portfolios. Full story
South Africa's trade account recorded a surplus of 4.7 billion rand in December compared with an 8.0 billion rand deficit in November, the South African Revenue Service said on Tuesday. Full story |
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Hong Kong shares were
set to open higher on Tuesday, bolstered by strength in Chinese
financials, with the benchmark indexes poised for their best
month since October last year. Full storyFrench lawmakers appealed to their country's highest court on Tuesday to overturn a law that makes it illegal to deny that the mass killing of Armenians by Ottoman Turks nearly a century ago was genocide. Full storyItalian authorities have ended the search for bodies in the submerged sections of the capsized Costa Concordia, more than two weeks after the giant cruise liner capsized off the Tuscan coast, officials said on Tuesday. Full story |
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Markets | U.S. stocks fell on
Tuesday as optimism over a possible deal by Greece in its
debt wrangling dissipated after a batch of. . . Full story | | Britain's top share index
got a boost from strong corporate results, higher oil prices and
improved risk appetite on Tuesday, enabling it to. . . Full story | | European stocks rose on
Tuesday on renewed hopes for a Greek debt deal, though gains
were capped by weaker-than-expected U.S. data that cast. . . Full story | | Commodity prices rose and
global equities edged higher on Tuesday, spurred by
investors' hopes Greece is close to resolving its debt crisis,
but U.S.. . . Full story |
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| Gold prices were on course
for their biggest monthly rise since August on Tuesday, boosted
by economic unease in Europe and the United. . . Full story | | European shares trimmed
gains on Tuesday after weaker-than-expected U.S. consumer
confidence readings and other data cast some doubt on the
strength of the recovery. . . Full story | | U.S. stocks opened higher
on Tuesday on signs of progress in dealing with
Europe's long-running sovereign debt crisis.. . . Full story | | European stocks were higher
around midday on Tuesday, reversing a sharp two-day slide and
resuming their six-week rally on renewed hopes for a. . . Full story |
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SA Business | Aquarius Platinum, the world's fourth-largest primary producer, joined a chorus of warnings from the platinum industry that a South African drive. . . Full story | | Miner Xstrata posted record output from its Australian thermal coal operations in 2011, boosting total coal production 7 percent, as the. . . Full story | | South African sovereign bonds weakened against the dollar on Tuesday before a weekly auction at which the government is taking the. . . Full story | | Growth in credit demand by South Africa's private sector was largely steady at 6.21 percent year-on-year in December compared with 6.22. . . Full story |
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| The South African rand traded slightly firmer against the dollar on Tuesday, drawing strength from hopes of a successful conclusion to. . . Full story | | Insurers Old Mutual and Sanlam are in talks to set up a joint venture to buy JPMorgan's South African fund administration. . . Full story | | Impala Platinum, the world's second largest platinum producer, said on Tuesday it was appointing Terence Goodlace as chief executive officer to. . . Full story | | A Nigerian court has ruled that Bharti Airtel's ownership of its subsidiary Airtel Nigeria is "null and void" because co-founder and. . . Full story |
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Company News | Great Basin announced that Mr H Wayne Kirk has resigned as a non-executive, independent director of the company with effect 30. . . Full story | | Shareholders of the company are advised that Mrs. Diane Godfrey ("Diane"), has resigned as the company secretary to Erbacon with effect. . . Full story | | RBPlat is in the process of finalising its annual financial results for the year ended 31 December 2011. The group advises. . . Full story | | Holders of Vukile linked units are referred to the detailed cautionary announcement released on SENS on 14 November 2011 and the. . . Full story |
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| Shareholders are referred to the announcement dated 15 December 2011 and are advised that the funding requirements are not yet finalised.. . . Full story | | The directors of AFGRI Ltd advise that Ms Marion Shikwinya has been appointed as AFGRI's company secretary with effect from 1. . . Full story | | Shareholders are advised that with effect from 10 January 2012, Afzal Patel an independent non-executive director has resigned from the board. . . Full story | | According to Business Report, retailer Pick n Pay has reportedly boycotted some of its suppliers who did not agree "to drop. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 33792.48 | 162.71 | 0.48% | JSE Top 40 | 17:00 | 30176.19 | 131.86 | 0.44% | JSE Gold | 17:00 | 2950.86 | -23.85 | -0.80% | JSE Financial | 17:00 | 23580.48 | 89.98 | 0.38% | JSE Industrial | 17:00 | 35519.02 | 297.99 | 0.85% | JSE Indust 25 | 17:00 | 29758.79 | 253.73 | 0.86% | JSE Resource | 17:00 | 55537.55 | 53.42 | 0.10% | DJ Futures | 19:56 | 12545.00 | -57.00 | -0.45% | DJ Ind | 19:45 | 12607.93 | -45.79 | -0.36% | SP 500 | 20:00 | 1310.47 | -2.54 | -0.19% | Nasdaq | 20:00 | 2807.77 | -4.17 | -0.15% | FTSE 100 | 18:35 | 5681.61 | 10.52 | 0.19% | DAX | 19:06 | 6458.91 | 14.46 | 0.22% | CAC40 | 19:06 | 3298.55 | 32.91 | 1.01% | Nikkei | 08:26 | 8802.51 | 9.46 | 0.11% | Shanghai | 09:26 | 2292.61 | 7.57 | 0.33% | Hang-Seng | 10:26 | 20390.49 | 230.08 | 1.14% | All Ords | 07:39 | 4325.70 | -8.70 | -0.20% | NZSE 50 | 06:46 | 3296.20 | -11.02 | -0.33% |
| | Name | Time | RP | Move | % Move | Gold | 19:58 | 1730.35 | -.71 | -0.04% | Gold/Rand | 20:00 | 13511.96 | -45.68 | -0.34% | Gold/R kg | 20:00 | 434409 | -601 | -0.14% | Silver | 19:59 | 33.1250 | -.3430 | -1.02% | Platinum | 19:58 | 1580.25 | -26.68 | -1.66% | Palladium | 19:59 | 682.50 | -1.73 | -0.25% | R157 | 12:02 | 6.45 | -.02 | -0.31% | R204 | 17:02 | 7.43 | -.02 | -0.20% | Brent Crude | 19:56 | 110.79 | .07 | 0.06% | Rand / Dollar | 19:59 | 7.8090 | -0.0243 | -0.31% | Rand / Pound | 19:55 | 12.2746 | -0.0092 | -0.07% | Rand / Euro | 19:55 | 10.2055 | -0.0985 | -0.96% | Rand / NZD | 19:57 | 6.4427 | 0.0230 | 0.36% | Rand / AUD | 19:55 | 8.2822 | -0.0250 | -0.30% | Yen / Dollar | 19:58 | 76.2930 | -0.0630 | -0.08% | Euro / Dollar | 19:55 | 0.7649 | 0.0042 | 0.55% | Dollar / Euro | 19:59 | 1.3071 | -0.0071 | -0.54% | Pound / Dollar | 19:55 | 0.6343 | -0.0020 | -0.31% |
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Click here for the Sharenet Spot Price page
The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
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31/01/2012 | 227 | 139 | 85 | 451 | 323,726,083 | R20,029,881,823 | 128319 | 2221949 | 30/01/2012 | 132 | 228 | 83 | 443 | 264,537,021 | R13,537,867,118 | 104364 | 2397787 | 27/01/2012 | 172 | 172 | 87 | 431 | 236,089,520 | R12,736,518,082 | 103386 | 2430322 | 26/01/2012 | 252 | 106 | 83 | 441 | 290,760,091 | R17,466,603,685 | 134036 | 2379644 | 25/01/2012 | 157 | 206 | 76 | 439 | 273,763,509 | R14,866,312,363 | 100314 | 2347366 |
Index Summary Index Name | RP | Move | % Move | Top 40 | 30,176.19 | 131.86 | 0.44% | Industrial | 35,519.02 | 297.99 | 0.85% | Mid Cap | 45,629.38 | 311.53 | 0.69% | Small Cap | 34,244.42 | 291.20 | 0.86% | Resource 20 | 55,537.55 | 53.42 | 0.10% | Industrial 25 | 29,758.79 | 253.73 | 0.86% | Financial 15 | 8,910.02 | 33.26 | 0.37% | Financial & Ind. 30 | 33,237.89 | 226.67 | 0.69% | All Share | 33,792.48 | 162.71 | 0.48% | Oil & Gas | 30,194.15 | 310.27 | 1.04% | Mining | 35,885.23 | -17.28 | -0.05% | Gold Mining | 2,950.86 | -23.85 | -0.80% | Platinum Mining | 63.45 | -.16 | -0.25% | GENERAL MINING | 8,966.36 | 12.56 | 0.14% | Oil & Gas Producers | 16,234.84 | 166.83 | 1.04% | Basic Materials | 30,350.85 | -5.56 | -0.02% | Chemicals | 14,051.65 | 22.16 | 0.16% | Forestry & Paper | 12,689.84 | -85.08 | -0.67% | Industrial Metals | 31,537.79 | 306.97 | 0.98% | Industrials | 30,555.99 | 209.81 | 0.69% | General Industrials | 86,129.55 | 710.66 | 0.83% | Consumer Goods | 30,520.01 | 71.13 | 0.23% | Automobiles & Parts | 4,617.23 | -2.27 | -0.05% | Household Goods | 164.31 | 0 | 0.00% | Health Care | 36,718.44 | 282.58 | 0.78% | Beverages | 101.83 | .08 | 0.08% |
| | Index Name | RP | Move | % Move | Food Producers | 56,461.18 | 634.69 | 1.14% | Personal Goods | 442.85 | 2.89 | 0.66% | Consumer Services | 60,263.67 | 908.07 | 1.53% | General Retailers | 50,408.33 | 422.72 | 0.85% | Travel & Leisure | 3,840.09 | 35.45 | 0.93% | Media | 86.10 | 1.90 | 2.26% | Support Services | 2,312.08 | -11.69 | -0.50% | Telecommunications | 66,070.48 | 1240.80 | 1.91% | Financials | 23,580.48 | 89.98 | 0.38% | Banks | 44,381.68 | 284.61 | 0.65% | Non-life Insurance | 35,609.79 | 1707.13 | 5.04% | Life Insurance | 18,632.43 | 93.99 | 0.51% | General Financial | 2,241.28 | 5.73 | 0.26% | Technology | 26,635.61 | -41.80 | -0.16% | SHARIAH TOP40 | 3,228.55 | 12 | 0.38% | FTSE/JSE SHARIAH ALL | 3,304.44 | 14 | 0.43% | COAL MINING | 26,071.77 | 514 | 2.01% | FTSE JSE Fledgling | 4,996.12 | 18 | 0.37% | FTSE/JSE Alt X | 1,210.78 | 9 | 0.78% | SA LISTED PROPERTY | 407.03 | | -0.54% | CAPPED PROPERTY | 330.08 | | -0.57% | RESOURCE | 30,598.62 | 33 | 0.11% | DIVIDEND PLUS | 188.37 | 2 | 1.02% | FTSE/JSE RAFI 40 | 7,058.08 | 31 | 0.44% | Capped Top 40 | 15,851.87 | 73 | 0.46% | Capped All Share | 17,068.69 | 83 | 0.49% | JSE TABACO | 4,625.72 | -51 | -1.09% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | MTN | MTN GROUP LIMITED | BUY | 27 Jan | AGL | ANGLO AMERICAN PLC | BUY | 27 Jan | NED | NEDBANK GROUP LTD | HOLD | 26 Jan | SBK | STANDARD BANK GROUP LIMIT... | SELL | 26 Jan | PFG | PIONEER FOODS GROUP LTD | SELL | 26 Jan |
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Results Expected** Expected | Company Name | Fin. Date | 01 Feb 2012 | ARROWA | September 2011 (Final) | 01 Feb 2012 | ARROWB | September 2011 (Final) | 01 Feb 2012 | MVELAGP-P | December 2011 (Interim) | 01 Feb 2012 | MVELAGRP | December 2011 (Interim) | 01 Feb 2012 | TELEMASTR | September 2012 (Final) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | HUDACO | 12-01-26 | 12-03-02 | 12-03-12 | R 3.1000 | FOORDCMPS | 12-01-19 | 12-02-03 | 12-02-13 | R 0.4961 | WINHOLD | 11-11-28 | 12-02-10 | 12-02-20 | R 0.0700 | TREMATON | 11-11-15 | 12-02-03 | 12-02-13 | R 0.0200 | TFG PREF | 11-11-03 | 12-03-15 | 12-03-26 | R 0.0650 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | SBR003 | 11-11-08 | 12-01-27 | 12-02-06 | R 1.4700 | PNR FOODS | 11-11-28 | 12-01-27 | 12-02-06 | R 0.4000 |
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Upcoming AGMs** Code | Company Name | Date | Status | WNH | Winhold Ltd | 31/01/2012 | Confirmed | NPKO | Nampak Ltd | 01/02/2012 | Confirmed | NPK | Nampak Ltd | 01/02/2012 | Confirmed | NPP2 | Nampak Ltd | 01/02/2012 | Confirmed | NPKP | Nampak Ltd | 01/02/2012 | Confirmed |
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