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SaurusDNA

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Everything posted by SaurusDNA

  1. For a while now I've been asking the question: "What percentage of my TFIA ETFs should be in 'foreign' indices?" Some people will immediately say "Put everything in foreign indices - the Rand is going to collapse or South Africa is going to be downgraded to junk" etc. And yet, the experts will typically tell you to put only 30% to 40% in foreign ETFs and the rest in local indices. So I've done a ton of study to find out why and the results surprised me - so much so that I have now changed the desired weightings of my TFIA ETF portfolio to allocate a greater percentage to local ETFs. Here's the thing. On the one hand, the Rand depreciates on average by 4% per year against the Dollar, and has pretty much done so since the time of Adam and Eve. Therefore, by buying ETFs of foreign indices, you are 'guaranteed' a 4% gain on your investment due to the weakening Rand. Now, on the other hand, let's look at foreign growth and interest on bonds, for example, where a 3% above-inflation is considered a good investment. Let's take England as an example. With its inflation close to 0%, a 3% return on an English investment would be considered "good." So if you had invested in an "England ETF, you would, by way of illustration, get your 0% inflation plus 3% return plus your 4% due to Rand depreciation, a total return of 7%. However, locally, it is South Africa's high inflation that makes it ideal for investment, which at first may seem counter-intuitive. Interest-bearing investments such as bonds and preference shares may also typically return inflation plus 3% - so with our 6% inflation, that gives a total return of 9%. And the JSE does much better than just inflation plus 3%! The other countries (outside of emerging markets) just don't have our inflation and therefore don't have the growth that the JSE index does. This is also why emerging markets are expected to give higher returns than developed markets in the long term. Secondly, putting more than say 40% in foreign indices means you are no longer diversified in the sense that if the Rands strengthens significantly, your portfolio collapses (and historically, it is highly unlikely to average a drop of more than 4% per year). On the other hand, the JSE index is not affected by the Rand in the same way, so whether the Rand drops or climbs, you're still guaranteed your above inflation growth on your local index ETFs. So betting too much on foreign indices is, in essence, going for a higher risk, but with lower returns, the exact opposite of what we should be doing. Of the academic studies I've read, most put the optimal risk-to-reward ratio for investing at 60% local and 40% foreign ETFs, and often support this with models. But now I finally understand why my previous 50% : 50% local : foreign split was considered high risk.
  2. SaurusDNA

    TFIA - Local vs foreign ETFs - ideal split?

    That is a most interesting observation. I have posted up the graph of STXEMG vs the JSE All-share index below. The correlation is clear to see and the difference in growth between the two is 10%!
  3. SaurusDNA

    Stock Watch Thread

    I'm trying to figure out why the Motus (MTH) share price keeps dropping. Their "fair value" is considered to be around R95 per share, their fundamentals are good, a forward P/E of around 7 and an expected dividend yield of 4.2%. They are the sole importers of Hyundai, Kia, Renault, Mitsubishi with massive growth potential. They're currently only at R78 per share. They started out very well but the last months has seen them lose almost 30% in just over a month. Well, they're at the support level now, so I'm seriously hoping they don't drop any further... Any thoughts on their short to medium term future?
  4. SaurusDNA

    South African Budget Speech 2019

    I guess the annual limits of Tax free investment accounts will remain at R33000 for the third year in a row then...
  5. SaurusDNA

    South African Budget Speech 2019

    And don't forget tax-bracket creep! This one is the silent unnoticed killers that they've been doing for the past few years. I don't know how they're going to manage the Eskom issue - if they bail out Eskom, we get the final ratings downgrade to junk by Moody's. If they don't, Eskom will be bankrupt by April. Things that I think will be strategically omitted from the speech (but really hope he does address): Tax free investment account annual and lifetime limit increases. How they're going to fund free education. How they're going to fund the e-tolls issue.
  6. SaurusDNA

    Stock Watch Thread

    Coincidentally, Standard Bank actually published a research report on Discovery yesterday (19 February 2019). They give DSY a current SELL recommendation based on a spot valuation of R116 and a 12-month target price of R132.
  7. SaurusDNA

    TFIA - Local vs foreign ETFs - ideal split?

    This whole discussion is academic, of course. Every person's financial situation is different and what suits one person may not suit another. I'm not so sure that I agree with you with regards to the pensions and RAs being all RSA though. Most pensions and RA plans have 30% directly offshore, and the 70% that is left is usually market capped, so your Naspers etc. weigh heavily with quite a lot of indirect offshore exposure, bringing the actual offshore exposure closer 50%.
  8. SaurusDNA

    TFIA - Local vs foreign ETFs - ideal split?

    In light of the above, I have changed my target TFIA ETF ratios to be 60% local and 40% foreign indices and my new target TFIA portfolio looks as follows: LOCAL (60%): Local equities: CTOP50: 10% DIVTRX: 10% NFEMOM: 10% STXQUA: 10% Local property: PTXTEN: 20% FOREIGN (40%): Foreign equities: ASHGEQ: 7.5% GLODIV: 7.5% STXEMG: 7.5% SYG4IR: 7.5% Foreign property: GLPROP: 10%
  9. SaurusDNA

    What property ETF to buy?

    Here's an excellent series of reviews on each of the property ETFs if you want some bedtime reading: Property ETF Series Part 1: CoreShares Proptrax SAPY Property ETF Series Part 2: CoreShares Proptrax Ten Property ETF Series Part 3: CoreShares S&P Global Property Property ETF Series Part 4: Satrix Property Property ETF Series Part 5: STANLIB SA Property ETF Property ETF Series Part 6: Sygnia Itrix Global Property ETF Note though that the long-term historic yields are not really applicable at the moment since the current yields have more than doubled in recent times, making property ETFs extremely attractive at the moment.
  10. SaurusDNA

    JSE Stock picks for 2019

    That's a good list. I particularly like CML and SHP for 2019. For community picks - I'd like to add Dis-Chem (JSE:DCP) and Discovery (JSE:DSY) to the list.
  11. SaurusDNA

    What property ETF to buy?

    Global property returns are always significantly less than local property returns (see table below). Since property ETFs are supposed to primarily produce income, I'd automatically remove GLPROP and SYGP from the list (these two I'd add if you specifically want diversification in the global section of your portfolio, but as an income earner main property ETF, the returns on these two aren't great compared to local property, even taking into account the average annual 4% Rand depreciation. ie. even with the 4% annual drop in the Rand taken into account, these indices consistently perform at roughly 3% lower than local property ETFs. I personally don't like PTXSPY and STPROP because these are uncapped and are heavily weighted in favour of three companies - they each have 50% of the total ETF in just Growthpoint, Redefine and Nepi Rockcastle. That being said, PTXSPY was the best performer of the six for the past year in terms of yield, but was the worst performer in terms of growth, due to the higher weighting of the big three. STXPRO and PTXTEN are both capped at 10% in any one company, which is a major plus in my opinion. The difference between STXPRO and PTXTEN is that PTXTEN is made up of the top 10 companies, each making up 10% of the ETF (equally weighted). On the other hand, STXPRO is made up of 15 companies at the moment, weighted by market capitalization, with a maximum of 10% in any one company. The difference in performance in earnings yield from PTXTEN is roughly 2% higher than from STXPRO. For the past year, the distribution yield from PTXTEN was 8.57%, whereas from STXPRO, it was 6.45%. This extra 2% makes a huge difference, and more than offsets the higher TER. The current income yields for the six you mentioned are as follows: PTXSPY: 9.00% PTXTEN: 8.57% STPROP: 8.45% STXPRO: 6.45% GLPROP: 2.76% SYGP: 1.99% The growth from the four is pretty similar (graph below), so I'd say you should choose using yields and risk as the criteria for your choice. In respect of yields, PTXSPY, PTXTEN and STPROP are pretty similar, with PTXSPY taking a slight lead. However, PTXTEN is less risky, being capped at 10% in any one company, whereas in the other two, you're the the mercy of the big three. For me, risk management is more important than the tiny extra percentage from PTXSPY, so my personal choice is PTXTEN. But in all fairness, all four of the local ETFs are pretty great and boils down to personal preference - performance vs appetite for risk.
  12. SaurusDNA

    My investment strategy for 2019

    So, this is what I'm going to do in 2019: My Tax free investment portfolio for 2019: I'm going to continue to add R2750 monthly to my TFIA. I currently have the following portfolio, and will continue in the same proportions: Local ETFs (50%): CTOP50 15% DIVTRX 10% PTXTEN 15% STXQUA 10% Global ETFs (50%): ASHGEQ 10% GLODIV 10% GLPROP 10% STXEMG 10% SYG4IR 10% My stocks for 2019: All extra monthly money above my TFIA, I usually put into stocks. I will continue doing so in the following stocks: CML (Coronation) 14.3% CPI (Capitec) 14.3% DCP (Dis-Chem) 14.3% DSY (Discovery) 14.3% L4L (Long for Life) 14.3% MRP (Mr. Price) 14.3% SHP (Shoprite) 14.3%
  13. SaurusDNA

    My investment strategy for 2019

    My Reasons for my strategy: Local vs global: First, my thoughts on local vs global ETFs. For the last 20 odd-years, the Rand has averaged a depreciation against the Dollar of roughly -4% per year. The S&P500 has had roughly 6.8% growth, thus giving a total return of roughly 11% (including Rand effects) by investing offshore. The JSE, on the other hand, has performed at over 15% per annum for this period. Global returns are generally lower than local returns because inflation is lower globally than in RSA. Thus, even with the dropping Rand, local returns historically still trump global returns in the long run. That's why I'm happy with a 50%/50% split in global vs local ETFs. My ETFs - the good and the bad: CTOP50: The JSE has never been cheaper. It's P/E is good enough even to start being attractive to foreign investors. Also, I love that 10% cap in any one company. This ETF is a must. DIVTRX: If the bear market continues, high-dividend shares perform better. That's why I'm holding on to this one for now, but eventually (after the market starts to recover), I may sell this and buy CTOP50 with this money. PTXTEN: Different asset class - not correlated to the JSE. Property always does well in the long tern and is at a 52-week low. A steal at this price. STXQUA: I just love the companies in this ETF - such attractive fundamentals. I own this one simply because I believe in the companies that this ETF represents. ASHGEQ: Diversified global. Core ETF. GLODIV: A smart-beta ETF - its methodology may outperform the global all-share index in the long run, so a competitor for ASHGEQ. GLPROP: Global property. I'm not too sure about this one, as global property returns are not generally as good as local ones, even with the extra 4% per annum Rand depreciation. I may sell this one eventually. For now, though, with the uncertainty in the market, this is just to have a different asset class. STXEMG: Highest potential for growth over 25 years. Emerging markets fluctuate wildly but always outperform developed markets in the very long term. SYG4IR: I had to have some Tech shares, but I already have too much in the USA through my other ETFs, Thus, this gives my exposure to the newest and most exciting tech in Asia. If I didn't have this I would replace it with STXNDQ, but I just don't want too much USA at the moment. The USA has had it's longest bull market in history. How long can it continue? It might, but I prefer to be diversified. My shares - why I own/will continue to buy these ones: CML: Dividends of almost 10% per annum - that's better than cash even before growth! My favourite stock pick for 2019 at the moment. CPI: Continues to remain strong, even in the terrible 2018. DCP: Tough choice between either Dis-Chem or Clicks. But I didn't want two in the same sector, since the two are very well correlated. I just feel that since Dis-Chem is new and Clicks is already well established, Dis-Chem has more potential for growth between the two. DSY: Historically rock solid, and with Discovery Bank on the way, it looks even more attractive than its already dazzling history. L4L: Still holding on to the belief that this one will take off one day. A bit of a risk, but it may pay off. MRP: Had a bit of a dip, but recovering nicely. Cheap clothes of reasonable quality must do well in the long run. And with its competitors in the clothing department losing the plot (I'm thinking Woolworth and Edgars here), it just has to go up. SHP: The poor performance of this stock has been due to negative inflation of the food products on its shelf (the average prices of its shelf actually dropped in 2018), thus dropping its turnover (and profit). As food inflation is expected to rise in 2019 (also with drought predicted again) this should reverse the losses and lead to considerable gains. This share is also very cheap at the moment.
  14. SaurusDNA

    ETF Portfolio advice

    Investing is very different to trading. Selling and buying long-term investments is not generally considered a good idea - the costs of buying and selling are high, taxes come into effect when selling, and timing the market is near impossible. If, like me, you also want to take advantage of the short-term movements in the market, better to open a separate trading account for that purpose and keep your long-term investments as buy-and-hold. As the age old long-term investment advice goes: "It's not about timing the market, it's about time in the market." My strategy to maximize gains from shorter-term movements (in my long-term investments) is to plan at the beginning of the year what I'm going to invest for the year. Then, each month, I buy what is cheap and then just hold forever. So, if the rand is strong, I buy my global ETFs, so that when the Rand weakens, I get further gains from the exchange rate. When the Rand is weak, I buy my local ETFs. Similarly, I buy my ETFs when they are at a low. But I never sell!!! For example, I bought all my 2019 PTXTENs already since it is at a 52 week low. NB: Note, however, that this strategy works for ETFs that are intended for long term investment, where the ETF is diversified. It does not work for single stocks, since a 52-week low in stocks may indicate weak financials or other reason. Buying the low in the long term is only really suitable for ETFs or unit trusts, not for single stocks!!!
  15. SaurusDNA

    ETF Portfolio advice

    Hi e4et That's a pretty solid core portfolio. A few thoughts though... Your 55% global ETFs, I'd keep exactly in the percentages they're in - 40% world and 15% US feels well diversified. No criticism here. Your local ratios might do with a little tweaking in my opinion though. In a bull market, momentum shares thrive (like Satrix Top 40, SWIX Top 40 and CTOP50). In a bear market such as we had in 2018, value/quality shares do better (like Satrix Divi and STXQUA). This is why your Divi ETF is doing much better (or much less badly, to be precise) than your other ETFs (that's of course putting aside the World ETF which is up because of the weak Rand). However, when the JSE starts going up again, you may miss out on the rapid growth that momentum shares usually experience. In my opinion, now would be the ideal time to even out your local shares ratio and go half value (Satrix Divi (STXDIV)) and half momentum (like Coreshares top 50 (CTOP50)), since momentum ETFs are really cheap at the moment. My biggest concern is that SWIX T40 is 28% Naspers at the moment and that percentage is getting bigger and bigger. With the uncertainty in Tencent at the moment, the future of Naspers is unclear. Fortunately you only have 15% in SWIX T40 at the moment, but I wouldn't invest more in SWIX if I could avoid it. What I feel you should have instead of SWIX top 40 is a well rounded local core momentum ETF that doesn't have excessive Naspers exposure. Due to your already high exposure in Naspers, I'd go for the Coreshares top 50 ETF (CTOP50) as it is capped at 10% in any one company, limiting further exposure to Naspers. If it were me, I'd keep your current portfolio as it is and use the 3k to buy CTOP50. After that, I wouldn't buy more SWIX T40 (rather continue buying CTOP50) but maybe keep the SWIX anyway as it is a small enough percentage of your portfolio to warrant the risk and it may shine if Naspers recovers. Then in the long run, try and get your portfolio to something like: Local (45%): CTOP50: 20% STXDIV: 20% SWIX Top 40: 5% Global (55%): Sygnia MSCI US: 15% Sygnia MSCI World: 40% In summary, the only real long term changes I'd make is to eventually move away from the SWIX Top 40 and replace this with a capped local core ETF like CTOP50 (which is much better balanced and much safer), and then drop your Satrix Divi to only half of your local exposure.
  16. SaurusDNA

    Brokers and Fees Comparison

    I'm with Standard Bank Online Share Trading and I was just wondering how the fees structures and services compare with other brokerages and if you're happy with your broker. Standard Bank has the following fees structure: Equities Monthly account cost: R90 0.50% per trade with a minimum of R90 + VAT STRATE fee: R10.71 So the minimum fee per trade is R114.81 before transfer fees. TFIA 0.25% + VAT (No minumum fee) CASH Interest earned on cash balance is 5.68% What I like about SB Online Share Trading: - It does what it's supposed to do and works well and is never down (as far as I know). - Cash transfers to and from my Standard Bank accounts are instant. - Fast and efficient brokers for phone trades - phone is normally answered within 10 seconds. - Detailed reporting such as annual and lifetime TFIA balances, even those not on the share trading platform (done by ID search). - Free detailed analysts forecasts and consensus and detailed research on almost all stocks - Instant SENS and news notifications for all stocks on watchlist What I don't like about SB Online Share Trading: - 25c fee for every sms including logging on. - 16c for every live quote. It's not so much he 16c that I'm not happy with - it's that you do get a R10 balance for quotes and sms's included in the monthly fee, and Standard Bank advertises on their cost structure that you get an additional R5 for every trade, but to date I have never received the additional R5. Also, it charges you the 16c live quote fee even when the market is closed. My rating of Standard Bank's Online Share Trading: 4.5/5 I would love to know how this compares to other brokerages, so post here if you'd like to give your thoughts, comments or fees structure of your broker.
  17. SaurusDNA

    "Take Profits" vs "Buy and hold"

    I'm an investor, not a trader, so in general, I don't do short term buy and sells - I choose companies with good trends over 10 years, if possible, with the occasional wildcard such as Steinhoff (I bought a few of these at 488c). I regularly try and revise my strategy and these are my two choices at the moment: Option 1) Buy and hold indefinitely with a trailing stop loss at 20%. Option 2) Buy and hold with a trailing stop loss at 20% and a "sell 50% of stocks at 40% profit" order, while letting the other half run. I'm still reluctant about using a "take profit" order, although many say this is the way to go, and I'm still most likely going to end up choosing option (1), but I'm interested on hearing your thoughts on this. Question 1) What is your opinion on "take profits" (or a portion thereof) as compared to "hold indefinitely" (for the investor, as opposed to trader), and what has worked for you? (As an investor, I'm talking about larger margins such as 20% trailing stop loss and 40% profit-taking, not the small margins used in day to day trading.) Question 2) What is your trailing stop loss percentage set at in a "buy and hold" strategy if you use stop losses? It seems the literature is split between 15% and 20% as being the optimal percentage for "buy and hold" stop losses - (Reference: https://www.quant-investing.com/blogs/general/2015/02/16/truths-about-stop-losses-that-nobody-wants-to-believe), although it is clear that the use of a wide trailing stop loss margin gives better returns than using no stop loss in "buy and hold" in the long term, provided it is 15% or larger, so wondering what you think and what has worked for you.... As the saying goes, "Theory guides, experiment decides.", so I'm interested in hearing what works best for investors on this forum.
  18. SaurusDNA

    Kumba Iron Ore or Exxaro?

    I have roughly equal amounts in KIO and EXX, and I've been meaning to sell one because it's duplication (the graphs are almost identical), and exxaro owns 20% of KIO anyway. But I've been holding on to both since I can't decide which one to keep and which one to buy. Any thoughts?
  19. The following discussion is for a TFIA ETF portfolio that I expect to grow for the next 20 years at least. I'm finding it very difficult to decide what percentage of my ETF TFIA portfolio to put in global ETFs and what percentage in local ETFs. Most people I ask immediately say 50/50, because whichever way the Rand goes, you're covered. However, this is not the case, as much of our "local" companies derive much of their profit from offshore branches. Thus, a 50/50 portfolio is heavily weighted in offshore exposure. ETFSA suggests that 30% of one's exposure should be offshore but doesn't give reasons why. (source: http://www.etfsa.co.za/docs/PortManServ/Global_ETF_managed_portoflios_brochure_jun2017_v2.pdf) I think one's choice should be guided with knowledge of how much "local" investment is actually hidden offshore investment, but this information is hard to find. Maybe the 30% global suggested by ETFSA is the way to go, but I can't help but feeling it might not be enough.
  20. I've been following the recent JSE listing of two companies in the last month of two. The first is the re-listing of Distell and the second is the new listing of Vivo energy in South Africa. The first is Vivo Energy (VVO) who will be responsible for the re-marketing and distribution of Shell fuels and lubricants in South Africa. If they succeed in bringing shell back to its former glory in South Africa, this mid-cap company could become massive. Secondly, Distell has re-listed as DGH after getting their act together and is now quite a profitable company. Any thoughts on these two? I think both these companies show huge potential and would just like to hear if others feel the same...
  21. SaurusDNA

    Critique my ETF portfolio

    This is my ETF portfolio. I'm interested to hear any thoughts on how you might tweak it and why... SYGWD 15% STXEMG 15% STXIND 15% SYGUS 14% GLPROP 7% SYGJP 7% STXQUA 7% ASHT40 7% STXRAF 7% ASHMID 6%
  22. SaurusDNA

    My experience with Takealot

    I've been using Takealot for years and never had a problem with them. I always use delivery and their delivery service is excellent. They always send an sms to say exactly which day wish to come and then the courier phones you to find out what time you'll be home. Delivery is always with plus or minus one hour of the agreed-upon time. Plus, their online tracking system is excellent. For delivery, I'd give them 10/10. Also, they're not fussy with returns or cancellations. Last month I accidentally bought an item that I already had and just before delivery, I noticed my mistake and wanted to cancel the item. I called their helpline and they cancelled the order immediately and without question and credited my account with the amount.
  23. SaurusDNA

    Who has RSA Retail Savings Bonds?

    PTXTEN is looking extremely attractive at the moment. With an 8.61% dividend yield for the past year (probably will be over 10% next year now that the price per units has dropped so much this year), this means you'll be scoring at least a 10% return on this ETF even if the price stays flat. If the market recovers and we get double digit growth again next year, it's possible we might even be getting a 25% - 30% return on this ETF next year. I've bought quite a bit of PTXTEN in the past two months. Also look at bond ETFs, which give you more flexibility than a two year fixed bond. The NFGOVI bond ETF in particular has done well this year with a 7.61% growth so far. But as long as PTXTEN doesn't drop further, its dividends are still better. Of course, there's also the chance it will continue to drop, whereas bonds or bond ETFs are a safe bet.
  24. SaurusDNA

    ETF Portfolio advice

    Only new deposits from outside the account to inside the account contribute towards the limit. Anything that happens within the account doesn't count towards the 33K limit. This means you can reinvest dividends, buy and sell ETFs as you wish within the account - change back and forth between Cash and ETFs etc, as long as you don't withdraw them from the account. None of these affect the limit. So basically, it's only brand new deposits into the account from outside the account that contribute to the limit.
  25. SaurusDNA

    ETF Portfolio advice

    I would wait. The market is at a 52 week low and INDI, for example, is down 25%. I'd hang on to what I have for now, and start balancing it out by only buying those that you have too little of.
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