• ETF Enthusiast

Biggest money lessons of 2017

It is the last day of the year and what a year it has been. Although short of water I am not short on lessons learnt this year and I want to share some of the biggest ones I experienced this year with you:

Time rewards generously

Finally, 3 years of sideways movement from JSE market has finally broken with the all share index giving us a 17% return for the year. Many of us in the market would have felt a bit anxious that this trend could continue even longer and would be glad that it seems to be past us.

Many of our top40 companies on the JSE earn their money internationally and these were the companies which showed most of the gains this year, although there has been a surge at the end of the year in South African based shares.

The rand has also strengthened about 10% to the dollar this year, meaning in dollar terms our markets gains are even greater.

Despite all the negative sentiments towards investing your money in South Africa over the last few years and urges to send all your money oversees this was a great year to be invested in this country.

There may be significantly challenges for the country still ahead but there is a growing confidence and optimism that is brewing.

Diversification and index investing

We are bound to see many companies share prices crash over our investment journey – this is a reality, and this year was no exception. It is extremely difficult to foresee which company will be next to tumble and even the most seasoned investors and asset management companies have been burnt by a case like Steinhoff.

Most of us (certainly not me) are not active investors; we don’t have the time to, research individual companies’ financials, research management practices and quality and value each of these companies. Regardless of time I don’t pretend to be able to do this better than any asset manager and for this reason I don’t buy shares in individual companies.

This year has reinforced my strategy to invest in exchange traded funds. This gives me a very diverse portfolio of thousands of companies and I ensure that no individual company contributes more than 2.5% to my entire portfolio (very few even contribute 1%). So although there were some Steinhoff International shares in my portfolio the negative effects were quite minimal.

This country is resilient

Although there were many calls to panic and join ‘robertinsydney’ (see comments section of linked article) I am more confident than ever that there is tremendous opportunity ahead for this country.

My hero for the year was the South African media. Although small they manage to do a brilliant job at holding people (government) accountable for incompetence, selfishness and corruption. This pressure is clearly felt and without it I don’t think we would have made most of the progress*₁ we have this year.

My optimism for the country has been reinvigorated and I wouldn’t be surprised if the locally invested portion of my portfolio outperforms the rests over the coming years.

*₁ Progress in terms of uncovering corruption and fighting to hold it accountable.

Invest in yourself

You are never going to open an article and have all your questions answered. You are never going to have any questions unless you dig a little deeper.

The more time you spend; thinking about your money (how you use it, and how you invest it), engaging people and discussions about saving and investing, practically applying yourself to take the steps to implement what you learn, refining what you learn and inevitably teaching others the more confidence you will have when it comes to dealing about every aspect of your money.

Investing in your own brain is without a doubt the most important thing you can do and it will pay you back more times than you can imagine in the long run, so let’s learn more than ever in 2018.

ETF Enthusiast

Use your money to build assets which generate more income than you require to live