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Tuesday, 05 November 2013 - 20:00
Charts
Seed Weekly - The Cash Safety Trap
The move from defined benefit funds to defined contribution funds and the subsequent transfer of pre and post retirement investment risk to the retiree, has created some very interesting scenarios for retirement funds members both approaching retirement and in their post retirement phase.
I have seen a number of “life stage” retirement portfolios which change the investment risk as a member nears retirement. Whilst the rationale is sound to a degree, those members who are planning to use investment linked living annuities rather than purchasing a guaranteed annuity need to be very careful of moving their entire investment amount to cash a couple of years before retirement. The reason why this happens is that it is assumed that people nearing retirement should not be exposed to capital volatility. Whilst this may be true for people purchasing a guaranteed annuity from an insurance company, this rationale ignores the fact that members transferring to a living annuity often have a thirty year plus time horizon for their investment. A recent presentation by Prescient graphically illustrated this example.
In this example we had a fund member (Mr Cash) who transferred all of his assets into cash three years before retiring in June 2008. Anybody who has had any exposure to equity markets will realize that our poor member’s retirement date was just before the biggest market crash in many years. The graph above also shows an example of a member (Mr Balanced) who stayed in a generic balanced fund (which can have exposure of up to 75% in equities) this is totally contrary to conventional wisdom on retirement funds. Our two members left their investment portfolios as is when transferring to a living annuity.
At retirement date Mr Balanced, who had invested in the generic balanced fund, had approximately R 600 000 more capital than Mr Cash and was feeling very smug. A month or so later he was feeling suicidal and Mr Cash felt that he had made the correct decision. Unfortunately, what normally would happen now is that Mr Balanced would say he cannot afford to stay in the balanced fund because “we are going to have a double dip” and he is going to lose all the money that he had saved for his retirement, he wants to switch into cash to be like Mr Cash (safe and steady). If he listened to his financial advisor (we will assume that he wasn’t feeling suicidal as well) and stayed in his balanced portfolio, three years later he would be substantially better off than Mr Cash.
The problem with long term cash investments, is that whilst you do not see much capital volatility, you are almost guaranteed to lose money in real terms in the long run. The graph illustrates that using absolute return or more flexible balanced funds will reduce this volatility but illustrates the point graphically that if you are going to be using an investment linked living annuity you can’t afford to be in cash type portfolios either before retirement or after retirement.
Kind regards,
Barry Hugo
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Top News
![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=%252Fnews_images_sn%252F1317717632.jpg "Man walks past the Johannesburg stock exchange offices in Sandton") South African stocks scaled record closing peaks for the second straight session on Tuesday, with platinum producers such as Impala Platinum leading the uphill charge on a weaker rand. Full story ![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=%252Fnews_images_sn%252F1295338946.jpg "A gold bar is shown next to coins") Gold prices fell on Tuesday after
a reading of U.S. service-sector business activity came in
stronger than expected, lifting the dollar, while the euro
retreated ahead of a European Central Bank meeting later this
week. Full story |
 A gunman opened fire in a
crowded New Jersey mall late on Monday before killing himself,
officials said, sparking a mass evacuation of the complex by
police who did not realize he was dead for several hours. Full story  D emocratic Republic of Congo's M23 rebel group on Tuesday called
an end to a 20-month revolt after the army captured its last
hilltop strongholds, raising hopes for peace in a region where
millions have died in nearly two decades of violence. Full story  The head of the U.N.
nuclear watchdog is considering an invitation to visit Tehran
for scheduled talks, a possible sign of progress in a
long-stalled investigation into suspected nuclear arms research
by Iran. Full story |
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Markets |
European shares slipped off a
five-year high on Tuesday, led lower by car-makers and insurers
as more European blue chips undershot earnings expectations.. . . Full story |
Britain's top share index weakened
on Tuesday, with insurer RSA sinking after a profit
warning while banks also dropped sharply.. . . Full story |
Stock markets around the world
edged lower on Tuesday as uncertainty over the European Central
Bank's next policy move gave investors caution, with. . . Full story |
U.S. stocks fell on Tuesday, as
investors took profit following two days of gains, ahead of data
later in the week they hoped. . . Full story | |||
U.S. stocks drifted down to
session lows Tuesday in the wake of data showing U.S.
service-sector business activity picked up in October and. . . Full story |
U.S. stocks fell at the open on
Tuesday ahead of services sector data, putting the S&P 500 on
pace to halt a two-day. . . Full story |
European shares halted gains just
below five-year highs and the euro steadied near seven-week lows
on Tuesday as uncertainty over the European Central. . . Full story |
Britain's benchmark equity index,
which hit a 5-month high last week, failed to make much headway
on Tuesday as a fall in the. . . Full story | ||||
SA Business |
Global brewer SABMiller reached a wage deal with more than 2,000 workers in South Africa on Tuesday, ending a five-week strike that had little impact on beer production.. . . Full story |
South Africa's HSBC Purchasing Managers' Index rose to 51.5 in October from 49.8 in September, its biggest expansion in 10 months as producers recovered from labour strikes, a survey showed on Tuesday.. . . Full story | |||||
South Africa's rand fell more than 1.3 percent against the dollar on Tuesday to its weakest level in two months as. . . Full story | Steel maker ArcelorMittal South Africa and Kumba Iron Ore said on Tuesday they had reached a supply agreement deal, replacing one. . . Full story | South Africa's National Union of Mineworkers will consider a revised wage offer from Northam Platinum, the world's fifth largest platinum producer,. . . Full story | COPY USN. . . Full story |
South Africa's central bank plans to invest in the Korean won and the Australian and New Zealand dollars as it diversifies its currency reserves, Deputy Governor Daniel Mminele said on Tuesday.. . . Full story |
Company News |
ArcelorMittal and Sishen Iron Ore Company (Pty) Ltd ("SIOC"), a subsidiary of Kumba, (collectively the "Parties") previously advised that they were. . . Full story |
Further to the trading statement released on SENS on 11 October 2013, a review of the financial results for the year. . . Full story |
With regard to the audited results for the year ended 30 June 2013, shareholders are advised that the abridged annual financial. . . Full story |
Ordinary shareholders and N-Share shareholders of Seardel (collectively, the "Seardel Shareholders") are referred to the announcement released by Seardel on SENS. . . Full story | |||
A conference call for analysts and investors will be held today, 5 November 2013, at 9.00 GMT.
A copy of this announcement is available for download from our website at intugroup.co.uk. . . Full story |
Shareholders are advised that, at the general meeting of StratCorp shareholders held on Friday, 1 November 2013, all the ordinary resolutions were passed by the requisite majorities of votes of shareholders. . . Full story |
The directors of Lib-Hold announced that Steven Braudo and Thabo Dloti have been appointed as executive directors of Lib-Hold, effective 4 November 2013.. . . Full story | |||||
Company Results | Revenue increased to R465.7 million (R351.4 million). Gross profit rose to R53.9 million (R37.1 million) and operating profit soared to R98. . . Full story | Revenue jumped to R43.0 million (R34.9 million). Gross profit increased to R25.3 million (R22.3 million). However, EBITDA decreased to R3.36 million. . . Full story | Dividend
An interim ordinary dividend of NAD2cps has been declared.
Outlook
The African continent's demand for micro insurance products has not been exhausted. Demand. . . Full story | Rockcastle published its first set of quarterly results since changing its year-end from March to June each year in 2013 and. . . Full story |
World Markets (Spot Prices)
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The JSE Today
| Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
|---|---|---|---|---|---|---|---|---|
| 05/11/2013 | 186 | 180 | 71 | 437 | 201,069,220 | R12,145,463,021 | 124421 | 1457498 |
| 04/11/2013 | 198 | 159 | 84 | 441 | 187,888,846 | R9,154,293,312 | 106294 | 1168942 |
| 01/11/2013 | 184 | 169 | 74 | 427 | 180,590,567 | R12,090,747,361 | 128596 | 751820 |
| 31/10/2013 | 177 | 183 | 59 | 419 | 213,783,848 | R12,316,981,503 | 139751 | 1362821 |
| 30/10/2013 | 215 | 136 | 75 | 426 | 181,768,755 | R9,941,080,332 | 112988 | 1165822 |
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Index Summary
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Stock Exchange News Service
| Date | Time | Headline |
| 05/11/2013 | 17:35 | EOH HOLDINGS LIMITED - Dealings In Securities By An Associate Of A Director |
| 05/11/2013 | 17:15 | EXXARO RESOURCES LIMITED - Disclosure of beneficial interests in securities |
| 05/11/2013 | 17:00 | LONDON FINANCE AND INVEST. GRP PLC - Crossing of 7% threshold in terms of UK dis... |
| 05/11/2013 | 16:58 | MMI HOLDINGS LIMITED - Dealing in Securities by a Director |
| 05/11/2013 | 16:50 | FIRSTRAND LIMITED - Dealing in securities by directors |
| 05/11/2013 | 16:37 | ARCELORMITTAL SOUTH AFRICA LIMITED - Withdrawal of cautionary announcement |
| 05/11/2013 | 16:31 | NORTHAM PLATINUM LIMITED - Zondereinde Mine Update |
| 05/11/2013 | 16:30 | OLD MUTUAL PLC - Total Voting Rights and Shares in Issue |
| 05/11/2013 | 16:30 | KUMBA IRON ORE LIMITED - Iron Ore Supply Agreement |
| 05/11/2013 | 16:04 | GROUP FIVE LIMITED - Results of Annual General Meeting |
| 05/11/2013 | 15:45 | METAIR INVESTMENTS LIMITED - Dealings In Securities |
| 05/11/2013 | 15:30 | REDEFINE INTERNATIONAL PLC - TR-1: Notification of Major Interest in Shares |
| 05/11/2013 | 15:30 | IMPERIAL GROUP LIMITED - Release of audited financial statements - Imperial Grou... |
| 05/11/2013 | 15:29 | INDWA INVESTMENTS LIMITED - Interest Rate Reset-IN0Q |
| 05/11/2013 | 15:21 | MAZOR GROUP LIMITED - Unaudited condensed consolidated interim results |
| 05/11/2013 | 15:18 | COMAIR LIMITED - Correction announcement: Dealing in securities by directors |
| 05/11/2013 | 15:03 | BOWLER METCALF LIMITED - Director's Dealing in Securities |
| 05/11/2013 | 15:00 | AUSTRO GROUP LIMITED - Posting of circular, salient dates and time of mandatory ... |
| 05/11/2013 | 14:50 | RESILIENT PROPERTY INCOME FUND LTD - Interest Rate Reset-RES18 |
| 05/11/2013 | 14:32 | AUSTRO GROUP LIMITED - Trading Statement |
| 05/11/2013 | 14:05 | RARE HOLDINGS LIMITED - Acquisition of property and assets and withdrawal of cau... |
| 05/11/2013 | 14:00 | ROCKCASTLE GLOBAL REAL EST CO LTD - Availability of abridged unaudited financial... |
| 05/11/2013 | 14:00 | VIVIDEND INCOME FUND LIMITED - Clearance For Directors Dealings |
| 05/11/2013 | 13:30 | B&W INSTRUMENTATION & ELECTRICAL LD - Further Trading Statement |
| 05/11/2013 | 13:24 | MIRANDA MINERAL HOLDINGS LIMITED - Notification in terms of section 122 of the C... |
| 05/11/2013 | 13:15 | CAPITEC BANK HOLDINGS LIMITED - Acceptance by a director of options granted in t... |
| 05/11/2013 | 13:14 | ROCKCASTLE GLOBAL REAL EST CO LTD - Abridged unaudited financial statements for ... |
| 05/11/2013 | 12:47 | CAPEVIN HOLDINGS LIMITED - Changes To The Board Of Directors, Appointment Of A N... |
| 05/11/2013 | 12:42 | DISCOVERY LIMITED - No change statement and notice of annual general meeting |
| 05/11/2013 | 12:15 | HYPROP INVESTMENTS LIMITED - No change statement and notice of Annual General Me... |
| 05/11/2013 | 12:00 | SEARDEL INVESTMENT CORPORATION LTD - Posting of circular and Notice of General M... |
| 05/11/2013 | 11:05 | SEKUNJALO INVESTMENTS LIMITED - Media release |
| 05/11/2013 | 10:49 | SEKUNJALO INVESTMENTS LIMITED - Audited Group Results For The Year Ended 31 Augu... |
| 05/11/2013 | 10:45 | DEUTSCHE BANK AG - Termination of listing |
| 05/11/2013 | 10:16 | COMAIR LIMITED - Dealings in securities by director |
| 05/11/2013 | 09:40 | BNP PARIBAS ARBITRAGE ISSUANCE B.V. - New Listing Announcement |
| 05/11/2013 | 09:35 | COMAIR LIMITED - Dealing in securities by a director |
| 05/11/2013 | 09:35 | SIBANYE GOLD LIMITED - Results of general meeting |
| 05/11/2013 | 09:00 | INTU PROPERTIES PLC - Interim Management Statement for the Period from 1 July 20... |
| 05/11/2013 | 08:55 | BLUE LABEL TELECOMS LIMITED - Directors dealings |
| 05/11/2013 | 08:45 | HOSPITALITY PROPERTY FUND LIMITED - Dealings in securities |
| 05/11/2013 | 07:32 | STRATCORP LIMITED - Results of the General Meeting |
| 05/11/2013 | 07:30 | LIBERTY HOLDINGS LIMITED - Changes in Directorate |
| 05/11/2013 | 07:05 | LONMIN PLC - Total Voting Rights and Capital as at 31 October 2013 |
| 05/11/2013 | 07:05 | CONSOLIDATED INFRASTRUCTURE GRP LTD - Dealing in securities by an associate of a... |
| 05/11/2013 | 07:05 | BRITISH AMERICAN TOBACCO PLC - Transaction in own shares |
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