Tuesday, 18 August 2015 - 20:00
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Seed Weekly - Is your portfolio diversified or diworsified?
In previous articles we have discussed the benefits of diversification. Like with all things, too much of a good thing can sometimes be a bad thing. Diversification has been described as probably the only free lunch an investor can get in portfolio construction. A well-diversified portfolio will have lower volatility and if done correctly, better risk/reward benefits.
Below is an example of a blended portfolio and the individual underlying funds that make up the portfolio. The blended portfolio is represented by the large red dot - a balanced portfolio that targets CPI + 6%. The large black dot is the average balanced fund.
The blended portfolio was able to outperform the average manager over the period with a lower downside deviation (the risk of losing capital). You will also notice that the portfolio’s downside deviation is lower than the underlying funds. Investors have therefore received the benefit of diversification by blending funds with low correlations to each other.
Unfortunately the diversification benefit does have its limits. With each additional fund added to the portfolio the diversification benefit decreases. Eventually you will reach a point where the portfolio’s risk is equal to that of the market and any extra inclusion will not provide any real benefit.
The graph below indicates this principle using a portfolio of shares. The benefits of lower volatility are marginal from owning 20 shares to 200 compared to the benefits from 1 to 20.
The ability of additional shares or funds to add meaningful outperformance to a portfolio decrease as more and more positions are added. If you have an over-diversified portfolio you are reducing the likelihood that your portfolio will outperform the market, the second reason for diversifying. Eventually, it will become easier and cheaper to buy an index tracker fund or ETF.
When constructing a portfolio there is no exact number of funds or shares that you should own in your portfolio. However, the principles discussed and the risk and return objectives of the portfolio must all be taken into account.
We typically aim to construct a portfolio with between 5 and 7 funds. By limiting the number of funds we are forced to have a high conviction in the fund and or managers that we select. Each fund manager is included for a specific purpose and is monitored against its benchmark objective and our expectations.
Kind regards,
Gerbrandt Kruger
Tel +27 21 914 4966
Fax +27 21 914 4912
Email info@seedinvestments.co.za
Seed is hiring: Click through to our LinkedIn profiles to see vacancies at Seed Investment Consultants and Seed Analytics
www.seedinvestments.co.za
Tue, 18 Aug 2015
Top News
Miner and commodity trader Glencore is considering closing its Eland platinum mine in South Africa due to falling prices, it said on Tuesday. Full story
Local markets
Gains in gold mining shares led the JSE upwards and offset 0.48% losses in resources, with the All Share index closing 0.45% higher on Tuesday. Full story |
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Thai authorities said on Tuesday they were looking for a suspect seen on closed-circuit television (CCTV) footage near a popular shrine where a bomb blast killed 22 people, nearly half of them foreigners. Full storyMyanmar's Nobel laureate Aung San Suu Kyi said on Tuesday her opposition would ally with powerful ousted ruling party leader Shwe Mann, as the country's political forces re-align in the biggest shake-up since the end of military rule. Full storyFormer president Mahinda Rajapaksa's attempt to stage a comeback in Sri Lanka's general election has ended in defeat as results on Tuesday showed the alliance that toppled him making decisive gains. Full story |
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Markets | A 6 percent tumble in Chinese
shares on Tuesday and disappointing earnings from Wal-Mart
dented U.S. equities while copper and oil prices touched
multi-year. . . Full story | | Gold fell on Tuesday, as the
dollar rebounded following upbeat U.S. housing data that
supported views of a looming interest rate increase by. . . Full story | | Chinese stocks
plunged more than 6 percent on Tuesday, their biggest fall in
three weeks, on speculation the central bank may be in. . . Full story | | Stocks fell on Tuesday, with
European markets buckling under heavy selling pressure carried
over from Asia after Chinese shares slumped 6 percent and
emerging. . . Full story |
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| Hong Kong's key share index
fell to its lowest level in six weeks on Tuesday, dragged down
by a sharp plunge in China. . . Full story | | Australian shares gave up early
gains and tumbled on Tuesday, as banks and resources stocks fell
after the yuan resumed its decline against. . . Full story | | Japan's Nikkei fell 0.3 percent on
Tuesday, hurt by weakness in futures markets and other Asian
stock markets as investors worried about. . . Full story | | World equity indexes advanced
modestly on Monday as upbeat U.S. housing data helped Wall
Street shrug off a weak manufacturing report, while the. . . Full story |
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SA Business | South Africa's Shoprite Holdings, Africa's biggest retailer by sales, will open nearly twice as many stores on the rest of the. . . Full story | | A mechanical fault at Chevron's 110,000 barrel a day South African refinery has forced a reduction in output by almost a. . . Full story | | The chief executive of South African bullion producer Harmony Gold Mining Co said on Tuesday he could entertain a moratorium on. . . Full story | | South Africa's rand extended losses against the dollar to a fresh 14-year low on Tuesday as expectations of hawkish minutes from. . . Full story |
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| Britain's index of leading shares
slipped on Tuesday, hit by a pick-up in inflation and a decline
in energy and mining stocks as oil and metals prices fell.. . . Full story |
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Company News | In the trading statement published on SENS on 5 June 2015, shareholders were advised that the Company expected to report an. . . Full story | | Shareholders are advised that Mr Yusuf Mahomed has been appointed as an independent non executive director to the Blue Label Board. . . Full story | | Shareholders are advised that:
* Mr JG Rademeyer will resign as Lead Independent Director and Chairman of the Audit and Risk. . . Full story | | In compliance with paragraph 3.59 of the JSE Limited Listings Requirements, shareholders of diversified resources group Exxaro are advised of the. . . Full story |
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| According to Business Day Sasfin has entered the transactional banking market and hopes the new division will break even within four years. With the roll-out of a transactional banking offering, Sasfin hopes to diversify its sources of income and help grow. . . Full story | | Further to the SENS announcement that was released on 17 August 2015 regarding the DirectorĘs Dealings, it must be noted that clearance was given in terms of paragraph 3.66 of the Listings Requirements of the JSE Ltd.. . . Full story |
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Company Results | Revenue for the year shot up to R578.0 million (R408.5 million). Gross profit jumped to R276.2 million (R178.5 million). Profit from. . . Full story | | Revenue for the year ended 30 June 2015 decreased to R13.9 billion (2014: R15.4 billion). Operating profit came in at R366.5. . . Full story | | Net insurance premiums increased by 17% to R1.527 billion (2014: R1.306 billion), net profit attributable to equity holders of the group. . . Full story | | Revenue decreased to R43.9 billion (R53 billion). Gross earnings lowered to R2.4 billion (R3.6 billion). Net operating loss rose came in. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 50977.03 | 225.93 | 0.45% | JSE Top 40 | 17:00 | 45467.35 | 179.83 | 0.40% | JSE Gold | 17:00 | 842.53 | 25.79 | 3.16% | JSE Financial | 17:00 | 45017.66 | 258.87 | 0.58% | JSE Industrial | 17:00 | 73857.81 | 427.08 | 0.58% | JSE Indust 25 | 17:00 | 65855.13 | 383.19 | 0.59% | JSE Resource | 17:00 | 35157.04 | -169.35 | -0.48% | DJ Futures | 19:28 | 17467.00 | -37.00 | -0.21% | DJ Ind | 19:58 | 17492.33 | -52.85 | -0.30% | SP 500 | 19:58 | 2094.17 | -8.27 | -0.39% | Nasdaq | 19:58 | 5055.06 | -36.64 | -0.72% | FTSE 100 | 17:35 | 6526.29 | -24.01 | -0.37% | DAX | 18:08 | 10915.92 | -24.41 | -0.22% | CAC40 | 18:08 | 4971.25 | -13.58 | -0.27% | Nikkei | 08:28 | 20554.47 | -65.79 | -0.32% | Shanghai | 09:28 | 3748.16 | -245.51 | -6.15% | Hang-Seng | 10:28 | 23474.97 | -339.68 | -1.43% | All Ords | 08:37 | 5309.40 | -59.20 | -1.10% | NZSE 50 | 08:28 | 5710.77 | -16.65 | -0.29% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1117.14 | -.51 | -0.05% | Gold R | 19:58 | 14423.53 | 4.23 | 0.03% | Gold R/kg | 19:58 | 463948 | -154 | -0.03% | Silver $ | 19:59 | 14.8470 | -.4700 | -3.07% | Platinum $ | 19:59 | 991.30 | -.20 | -0.02% | Palladium $ | 19:59 | 595.75 | -17.55 | -2.86% | R186 | 17:34 | 8.28 | .08 | 0.91% | R204 | 17:34 | 7.56 | .07 | 0.93% | R207 | 17:34 | 7.78 | .07 | 0.84% | Brent Crude | 19:18 | 48.60 | -.43 | -0.88% | USD / ZAR | 19:59 | 12.9142 | 0.0164 | 0.13% | GBP / ZAR | 19:55 | 20.1922 | 0.1107 | 0.55% | EUR/ ZAR | 19:55 | 14.2399 | -0.0576 | -0.40% | NZD/ ZAR | 19:58 | 8.4965 | 0.0173 | 0.20% | AUD / ZAR | 19:55 | 9.4748 | -0.0405 | -0.43% | USD / JPY | 19:59 | 124.3780 | -0.0330 | -0.03% | EUR / USD | 19:59 | 1.1026 | -0.0051 | -0.46% | GBP / USD | 19:59 | 1.5657 | 0.0074 | 0.48% |
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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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18/08/2015 | 203 | 142 | 70 | 415 | 260,895,289 | R17,258,096,147 | 222540 | 1585095 | 17/08/2015 | 165 | 170 | 65 | 400 | 214,540,505 | R15,921,623,036 | 243963 | 1534496 | 14/08/2015 | 129 | 242 | 47 | 418 | 192,343,218 | R14,318,960,777 | 188695 | 1515140 | 13/08/2015 | 205 | 148 | 60 | 413 | 220,165,700 | R16,745,063,621 | 202590 | 1610277 | 12/08/2015 | 98 | 269 | 44 | 411 | 286,816,236 | R22,332,758,872 | 301392 | 1808752 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 45,467.35 | 179.83 | 0.40% | Industrial | 73,857.81 | 427.08 | 0.58% | Mid Cap | 67,243.61 | 565.03 | 0.85% | Small Cap | 59,039.58 | 16.06 | 0.03% | Resource 20 | 35,157.04 | -169.35 | -0.48% | Industrial 25 | 65,855.13 | 383.19 | 0.59% | Financial 15 | 16,950.37 | 97.26 | 0.58% | Financial & Ind. 30 | 71,092.21 | 370.29 | 0.52% | All Share | 50,977.03 | 225.93 | 0.45% | Oil & Gas | 9,312.06 | 8.46 | 0.09% | Mining | 20,940.45 | -107.77 | -0.51% | Gold Mining | 842.53 | 25.79 | 3.16% | Platinum Mining | 21.48 | -.10 | -0.46% | GENERAL MINING | 6,387.36 | -58.05 | -0.90% | Oil & Gas Producers | 50,069.25 | 45.52 | 0.09% | Basic Materials | 20,791.36 | -64.93 | -0.31% | Chemicals | 20,689.95 | -49.08 | -0.24% | Forestry & Paper | 49,634.09 | 331.65 | 0.67% | Industrial Metals | 5,894.03 | -156.31 | -2.58% | Industrials | 44,097.42 | 555.74 | 1.28% | General Industrials | 158.87 | 2.72 | 1.74% | Consumer Goods | 67,965.91 | 480.97 | 0.71% | Automobiles & Parts | 8,324.15 | -22.64 | -0.27% | Household Goods | 538.73 | 14 | 2.75% | Health Care | 9,847.27 | 92.01 | 0.94% | Beverages | 228.24 | 1.57 | 0.69% |
| | Index Name | RP | Move | % Move | Food Producers | 8,730.28 | 142.67 | 1.66% | Personal Goods | 1,026.53 | -.60 | -0.06% | Consumer Services | 15,612.91 | 58.06 | 0.37% | General Retailers | 8,258.77 | 164.00 | 2.03% | Travel & Leisure | 5,984.69 | 23.03 | 0.39% | Media | 370.66 | -1.45 | -0.39% | Support Services | 3,241.55 | -33.41 | -1.02% | Telecommunications | 9,836.46 | 17.44 | 0.18% | Financials | 45,017.66 | 258.87 | 0.58% | Banks | 7,666.86 | 37.21 | 0.49% | Non-life Insurance | 55,602.68 | 638.05 | 1.16% | Life Insurance | 41,741.96 | 139.11 | 0.33% | General Financial | 4,709.85 | 69.74 | 1.50% | Technology | 69,173.23 | 571.39 | 0.83% | SHARIAH TOP40 | 3,353.48 | 5 | 0.16% | FTSE/JSE SHARIAH ALL | 3,561.88 | 12 | 0.34% | COAL MINING | 8,132.44 | -211 | -2.53% | FTSE JSE Fledgling | 6,710.35 | -14 | -0.21% | FTSE/JSE Alt X | 1,458.01 | 4 | 0.28% | SA LISTED PROPERTY | 654.50 | | 0.42% | CAPPED PROPERTY | 583.86 | | 0.53% | RESOURCE | 19,017.24 | -98 | -0.51% | DIVIDEND PLUS | 206.82 | 1 | 0.30% | FTSE/JSE RAFI 40 | 9,201.67 | 27 | 0.29% | Capped Top 40 | 24,276.01 | 99 | 0.41% | Capped All Share | 25,856.48 | 115 | 0.45% | JSE TABACO | 9,486.95 | 38 | 0.40% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | EXX | EXXARO RESOURCES LIMITED | HOLD | 17/08/2015 | NPN | NASPERS LIMITED | BUY | 13/08/2015 | OML | OLD MUTUAL PLC | BUY | 12/08/2015 | RBP | ROYAL BAFOKENG PLATINUM L... | BUY | 12/08/2015 | SGL | SIBANYE GOLD LIMITED | HOLD | 11/08/2015 |
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Results Expected** Expected | Company Name | Fin. Date | 19/08/2015 | BLUETEL | May 2015 (Final) | 19/08/2015 | DEFCAP | June 2015 (Final) | 19/08/2015 | EASTPLATS | March 2015 (Q) | 19/08/2015 | GLENCORE | June 2015 (Interim) | 19/08/2015 | SHOPCONV | June 2015 (Final) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | CLIENTELE | 17/08/15 | 11/09/15 | 21/09/15 | ZAR 0.9000 | GROUP 5 | 17/08/15 | 17/09/15 | 28/09/15 | ZAR 0.2500 | ADAPTIT | 17/08/15 | 04/09/15 | 14/09/15 | ZAR 0.1090 | STANBANK6.5 | 14/08/15 | 28/08/15 | 07/09/15 | ZAR 0.0325 | STANBANK-P | 14/08/15 | 28/08/15 | 07/09/15 | ZAR 3.5320 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | FIRSTRANDB-P | 28/07/15 | 14/08/15 | 24/08/15 | ZAR 3.6393 | BATS | 29/07/15 | 14/08/15 | 30/09/15 | GBP 0.4940 | SABVEST | 29/07/15 | 14/08/15 | 24/08/15 | ZAR 0.2100 | SABVEST-N | 29/07/15 | 14/08/15 | 24/08/15 | ZAR 0.2100 | MONDILTD | 06/08/15 | 14/08/15 | 15/09/15 | EUR 0.1438 |
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Upcoming AGMs** Code | Company Name | Date | Status | DLT | Delta Property Fund Ltd. | 19/08/2015 | Confirmed | ART | Argent Industrial Ltd. | 20/08/2015 | Confirmed | RACP | RECM - Calibre Ltd. | 20/08/2015 | Confirmed | RACC | RECM - Calibre Ltd. | 20/08/2015 | Confirmed | SPA | Spanjaard Ltd. | 21/08/2015 | Confirmed |
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