Tuesday, 15 April 2014 - 20:00
Charts
Seed Weekly - Considering all Investment Risks
While virtually all investors acknowledge that investing involves taking on risk, most investors do not know or take the time to clarify these risks and also to understand the interplay. For example, an investor may be overly concerned about taking on too much market risk and when reducing this risk too much, inadvertently takes on too much longer term inflation risk with a more conservatively constructed portfolio.
It ultimately all comes down to how you define risk and on which aspect an investor places the highest value. A good definition of risk is: “The chance that an investment's actual return will be different than expected because risk includes the possibility of losing some or all of the original investment.”
A typical investment risk pyramid may look something like this, but this is too simplistic a view of the actual risks that an investor faces.
Firstly, for most investors is the mortality or actuarial risk. This is the risk that having saved up a quantum of savings over your productive life, into your retirement years you run out of savings as you live longer than expected, drawing down too quickly on your accumulated savings.
Then there is inflationary risk. Where an investor aims to achieve a rate of return of at least the inflation rate over time from his investment portfolio, there is a risk that his investments will not achieve this return because of inferior performance or where inflation becomes rampant and at worst hyperinflation.
Ironically in times of very high inflation and hyperinflation it is the relatively "safe" investments such as fixed income investments that are the highest risk investments, while the typically understood “risker” investments such as shares, are the lowest risk, in that they have a higher probability of preserving purchasing power.
Once an investor has considered these two main risks, he needs to consider the following, which individually and collectively impact on the mortality and inflationary risk:
• Market risk is the risk that the value of your investments fluctuates and at worst, in a major market decline, results in permanent loss of the original capital invested. This is the one risk that many investors fear more than any others, often without having properly considered mortality and inflationary risk.
• The risk of default is one where an investor expects a certain guaranteed return typically from a fixed interest investment such as a bond issued by a government or a corporate and before maturity of the fixed investment, the issuer defaults, with the investor not being fully paid out and in the worst case scenario receiving nothing back.
• Liquidity risk is the risk that when the investor wants to convert the investment into readily available cash he is unable to do so for various reasons. Typically speaking less liquid investments, for example private equity, should generate higher returns that a money market investment. Part of the reason for generating this higher return is the higher liquidity risk.
• Interest rate risk is risk generally associated with an investment into fixed interest investments. While these investments are typically understood to be in the lower risk category, where an investor has, for example, invested into a 10 year bond yielding 8.5% pa, the risk to the investor is where interest rates move up and now similar bonds yield 10.5%. In such a case the investor will suffer capital loss.
• Another risk each investor faces is political risk. This is because governments have far reaching ability to implement legislation that can severely impact companies, taxes, and property ownership rights for example. While certain governments around the world are seen to be “investor friendly” there are many that have a far more inconsistent approach to legislation, increasing this risk.
• Currency risk arises due to a global economy where one currency floats against another. Being exposed to just one currency is itself a risk, but where an investor converts a portion of his investment into another currency, he runs a currency risk should that currency in which he invested decline on a relative basis. South Africans have typically benefitted from currency risk, but there have been long periods of time where the Rand has appreciated and then this risk is more fully appreciated.
When looking at risk in this context, it is less important and indeed less meaningful to try and ascribe a single number to risk, such as standard deviation or price volatility. It is far more meaningful to consider each risk and its potential impact on the investors financial planning and the total portfolio.
Kind regards
Ian de Lange
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Tue, 15 Apr 2014
Top News
South Africa's Association of Mineworkers Construction Union (AMCU) on Tuesday asked the government and the public for funds to help striking members in the platinum sector, who have gone nearly three months without pay. Full story
Gold prices tumbled
about 2 percent on Tuesday, hit by technical selling below its
key 200-day moving average and as investors cashed in after its
sharp rally on hopes that the U.S. Federal Reserve would not
raise interest rates any time soon. Full story |
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Ukrainian
armed forces on Tuesday launched a "special operation" against
militiamen in the country's Russian speaking east, authorities
said, recapturing a military airfield from pro-Moscow
separatists. Full storyUkrainian armed forces on Tuesday launched a "special operation" against militiamen in the country's Russian speaking east, authorities said, recapturing a military airfield from pro-Moscow separatists. Full storyJordan's ambassador to
Libya was kidnapped on Tuesday by gunmen who demanded an
Islamist militant be released from a Jordanian jail in exchange
for the diplomat's freedom. Full story |
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Markets | U.S. stocks fell on Tuesday
as early gains evaporated when momentum shares once again lost
ground, overshadowing a jump in Coca-Cola and Johnson. . . Full story | | European stocks sank on
Tuesday, resuming last week's sell-off as worries over
escalating tension in Ukraine and weak updates by bellwethers
including Nestle spooked. . . Full story | | Global equity markets
declined and government debt rose on Tuesday as tensions spiked
in Ukraine as Russia declared the country on the brink. . . Full story | | Britain's top shares sank to
their lowest close in three weeks on Tuesday, hit by mining
companies on concern about demand, while the. . . Full story |
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| The dollar erased gains
against the euro on Tuesday as traders discounted recent
comments from European Central Bank policymakers and an uptick
in U.S.. . . Full story | | U.S. stocks opened slightly
higher on Tuesday after earnings from Coca Cola and Johnson &
Johnson overshadowed a mixed bag of economic data.. . . Full story | | Crisis in Ukraine, weak trading
updates from European companies and worries over China's economy
turned investors sour on riskier assets on Tuesday, driving
shares. . . Full story | | Britain's top share index edged
down in cautious trading on Tuesday, led down by miners on
concerns about rising supply and slowing demand. . . Full story |
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SA Business | The South African rand weakened against the dollar for the fourth straight trading session on Tuesday as the market fretted about. . . Full story | | South African grocer Pick n Pay reported a 25 percent jump in annual profit, its first increase in three years, as. . . Full story | | Nigerian annual consumer price inflation edged up in March to 7.8 percent from 7.7 percent in February as food prices rose,. . . Full story | | Gold rose to a
three-week high on Monday as renewed concerns over the
escalation of hostilities in Ukraine prompted investors to add
positions. . . Full story |
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| South African stocks were led lower by top tier mining stocks on Tuesday as global gold prices slumped by more than two percent on U.S. dollar strength.. . . Full story | | South Africa's Sibanye Gold aims to make a "material" acquisition in platinum mining by the end of this year as it seeks to diversify its business, its chief executive said in a newspaper interview on Tuesday.. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 47789.76 | -423.50 | -0.88% | JSE Top 40 | 17:00 | 42905.65 | -359.39 | -0.83% | JSE Gold | 17:00 | 1501.16 | -49.98 | -3.22% | JSE Financial | 17:00 | 35275.51 | -216.93 | -0.61% | JSE Industrial | 17:00 | 61589.02 | -578.94 | -0.93% | JSE Indust 25 | 17:00 | 54300.02 | -491.09 | -0.90% | JSE Resource | 17:00 | 55963.01 | -524.58 | -0.93% | DJ Futures | 19:52 | 16070.00 | -26.00 | -0.16% | DJ Ind | 19:58 | 16139.68 | -33.56 | -0.21% | SP 500 | 19:58 | 1826.86 | -3.75 | -0.20% | Nasdaq | 19:58 | 3982.33 | -40.36 | -1.00% | FTSE 100 | 17:29 | 6537.91 | -45.85 | -0.70% | DAX | 18:08 | 9173.71 | -165.46 | -1.77% | CAC40 | 18:08 | 4345.35 | -39.21 | -0.89% | Nikkei | 08:28 | 13996.81 | 86.65 | 0.62% | Shanghai | 09:28 | 2101.60 | -29.94 | -1.40% | Hang-Seng | 10:28 | 22671.26 | -367.54 | -1.60% | All Ords | 08:46 | 5380.30 | 26.70 | 0.50% | NZSE 50 | 07:48 | 5076.28 | 12.74 | 0.25% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1302.29 | -24.03 | -1.81% | Gold R | 19:59 | 13764.89 | 13764.89 | 0.00% | Gold R/kg | 19:58 | 442481 | -5012 | -1.12% | Silver $ | 19:59 | 19.4900 | -.4630 | -2.32% | Platinum $ | 19:59 | 1438.90 | -21.60 | -1.48% | Palladium $ | 19:59 | 793.00 | -13.83 | -1.71% | R157 | 16:06 | 6.80 | .04 | 0.67% | R186 | 16:06 | 8.42 | .04 | 0.54% | R204 | 16:06 | 7.79 | .03 | 0.39% | R207 | 16:06 | 8.01 | .02 | 0.31% | Brent Crude | 19:38 | 108.81 | 1.48 | 1.38% | Rand / Dollar | 19:59 | 10.5700 | 0.0673 | 0.64% | Rand / Pound | 19:55 | 17.6440 | 0.1021 | 0.58% | Rand / Euro | 19:55 | 14.5983 | 0.0782 | 0.54% | Rand / NZD | 19:59 | 9.1325 | 0.0124 | 0.14% | Rand / AUD | 19:55 | 9.8826 | -0.0150 | -0.15% | Yen / Dollar | 19:59 | 101.7520 | -0.0880 | -0.09% | Euro / Dollar | 19:59 | 0.7240 | 0.7240 | 0.00% | Dollar / Euro | 19:59 | 1.3813 | -0.0005 | -0.03% | Pound / Dollar | 19:50 | 0.5976 | -0.0001 | -0.02% |
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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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15/04/2014 | 140 | 227 | 66 | 433 | 216,682,648 | R15,643,874,356 | 175353 | 1168973 | 14/04/2014 | 174 | 163 | 73 | 410 | 209,028,035 | R15,452,866,143 | 180802 | 1503632 | 11/04/2014 | 108 | 192 | 81 | 381 | 183,116,325 | R11,148,844,451 | 131079 | 167337 | 10/04/2014 | 205 | 161 | 67 | 433 | 271,380,744 | R17,428,256,996 | 182376 | 137116 | 09/04/2014 | 221 | 136 | 60 | 417 | 288,124,367 | R18,544,587,487 | 203849 | 1290143 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 42,905.65 | -359.39 | -0.83% | Industrial | 61,589.02 | -578.94 | -0.93% | Mid Cap | 61,565.21 | -837.49 | -1.34% | Small Cap | 51,921.78 | -51.72 | -0.10% | Resource 20 | 55,963.01 | -524.58 | -0.93% | Industrial 25 | 54,300.02 | -491.09 | -0.90% | Financial 15 | 13,461.07 | -77.58 | -0.57% | Financial & Ind. 30 | 58,009.03 | -461.15 | -0.79% | All Share | 47,789.76 | -423.50 | -0.88% | Oil & Gas | 43,200.34 | -152.10 | -0.35% | Mining | 33,535.93 | -373.65 | -1.10% | Gold Mining | 1,501.16 | -49.98 | -3.22% | Platinum Mining | 49.88 | -.38 | -0.76% | GENERAL MINING | 9,678.85 | -85.57 | -0.88% | Oil & Gas Producers | 23,228.02 | -81.79 | -0.35% | Basic Materials | 29,494.31 | -341.24 | -1.14% | Chemicals | 23,672.91 | -294.65 | -1.23% | Forestry & Paper | 28,916.39 | -576.56 | -1.95% | Industrial Metals | 21,226.85 | -38.39 | -0.18% | Industrials | 43,989.52 | -451.31 | -1.02% | General Industrials | 139.01 | -1.53 | -1.09% | Consumer Goods | 57,859.35 | -378.72 | -0.65% | Automobiles & Parts | 9,361.27 | -330.61 | -3.41% | Household Goods | 353.11 | 2 | 0.68% | Health Care | 75,894.24 | -237.97 | -0.31% | Beverages | 183.54 | -4.09 | -2.18% |
| | Index Name | RP | Move | % Move | Food Producers | 68,418.41 | -568.25 | -0.82% | Personal Goods | 1,036.62 | 4.60 | 0.45% | Consumer Services | 10,665.04 | -116.43 | -1.08% | General Retailers | 58,895.22 | -818.77 | -1.37% | Travel & Leisure | 5,556.06 | -26.41 | -0.47% | Media | 230.66 | -1.91 | -0.82% | Support Services | 2,630.09 | -59.19 | -2.20% | Telecommunications | 10,342.88 | -172.83 | -1.64% | Financials | 35,275.51 | -216.93 | -0.61% | Banks | 60,660.05 | -802.43 | -1.31% | Non-life Insurance | 49,336.98 | -2217.88 | -4.30% | Life Insurance | 33,561.24 | -102.26 | -0.30% | General Financial | 3,573.08 | -26.92 | -0.75% | Technology | 41,309.48 | 117.01 | 0.28% | SHARIAH TOP40 | 4,133.71 | -40 | -0.97% | FTSE/JSE SHARIAH ALL | 4,237.18 | -43 | -1.00% | COAL MINING | 17,826.14 | -30 | -0.17% | FTSE JSE Fledgling | 6,577.14 | -50 | -0.76% | FTSE/JSE Alt X | 1,205.82 | -0 | -0.00% | SA LISTED PROPERTY | 509.60 | | -0.05% | CAPPED PROPERTY | 437.66 | | 0.04% | RESOURCE | 30,618.83 | -298 | -0.97% | DIVIDEND PLUS | 218.37 | -2 | -1.10% | FTSE/JSE RAFI 40 | 9,610.15 | -97 | -1.00% | Capped Top 40 | 22,703.00 | -187 | -0.82% | Capped All Share | 24,193.66 | -213 | -0.87% | JSE TABACO | 7,760.74 | 18 | 0.23% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | AVI | AVI LTD | BUY | 14/04/2014 | RCL | RCL FOODS LIMITED | HOLD | 14/04/2014 | PFG | PIONEER FOODS GROUP LTD | HOLD | 14/04/2014 | SAB | SABMILLER PLC | HOLD | 14/04/2014 | SHF | STEINHOFF INTERNATIONAL H... | HOLD | 14/04/2014 |
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Results Expected** Expected | Company Name | Fin. Date | 17/04/2014 | NUWORLD | February 2014 (Interim) | 17/04/2014 | NUWORLD-N | February 2014 (Interim) | 17/04/2014 | OANDO | December 2013 (Final) | 18/04/2014 | REBOSIS | February 2014 (Interim) | 22/04/2014 | CMH | February 2014 (Final) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | BARWORLD6%P | 14/04/14 | 09/05/14 | 19/05/14 | ZAR 0.0600 | PHUMELELA | 11/04/14 | 16/05/14 | 26/05/14 | ZAR 0.2800 | FPT | 10/04/14 | 30/04/14 | 12/05/14 | ZAR 0.2900 | ZEDER | 07/04/14 | 23/04/14 | 05/05/14 | ZAR 0.0450 | ASTRAPAKP | 04/04/14 | 23/04/14 | 05/05/14 | ZAR 4.0049 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | CAPITEC | 26/03/14 | 10/04/14 | 22/04/14 | ZAR 4.6000 | SHFINV-PREF | 04/03/14 | 10/04/14 | 22/04/14 | ZAR 3.5400 | VUNANI | 24/03/14 | 10/04/14 | 22/04/14 | ZAR 0.2500 | AFROX | 27/02/14 | 10/04/14 | 22/04/14 | ZAR 0.2000 | INTUPLC | 20/03/14 | 10/04/14 | 20/05/14 | GBP 0.1000 |
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Upcoming AGMs** Code | Company Name | Date | Status | RBP | Royal Bafokeng Platinum Ltd. | 16/04/2014 | Confirmed |
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