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VIEWPOINT: Investment frameworks

“Remember all those investment scams and you’ll better understand that ‘boring is good’.”

An all too common strategy for investing is “let’s pick the brightest star in the investment universe and make quick profits”. Consequently, “buy-high sell-low” stories are legion.

Clients frequently ask me about tank containers and yes, there still seems to be a market for them. Or people want “hot tips” – is this a good time to buy property, or gold, or a particular share? And what about ETFs and index trackers? I’m a firm believer in the old saying, “if it’s too good to be true, it probably is”, and Tannebaum, Fidentia, Sharemax are just a few examples of investments plundered.

Though investors think they understand the risks of their own behaviours, they still fall prey to the greed impulse. This is why even when markets rise, investors frequently fail. A successful approach to investing is in fact the simplest. Ask yourself the following questions,

  • What do I need the money for – a home; children’s education; retirement; “toys for boys”?
  • Can I readily afford to lose this money?
  • If it’s speculative, am I prepared to accept that it’s a gamble? Like betting on the roulette table or horses, whether I win or lose at least it was fun.
  • But if not, I need to consider:
    • What is my objective? Possibly providing for a child’s university education?
    • What is the time frame? Maybe 15 years, in which case let time and compounding work for me.
    • Do I need to protect against inflation? Inflation’s a reality so I need at least CPI.
    • Do I have the stomach for volatile returns? If not, a “real return” or guaranteed strategy would suit me best. Therefore, I need investment experts to identify appropriate asset classes and construct a portfolio of these assets with best of breed investment managers. Don’t forget to continually reassess and optimise the investment.
    • Am I prepared to risk my capital being stolen by a Bernie Madoff? If not, I need regulated structures such as a unit trust protected in terms of the Collective Investments Control Schemes Act (CISCA) and Financial Services Board (FSB). Retirement products are also governed by Regulation 28 of the Pension Funds Act. Under both, the underlying asset classes – shares, bonds, cash, property, and stipulated alternative investments – are carefully regulated. They tend to be “boring”, but remember all those investment scams and you’ll better understand that “boring is good”.



So, as accountants we spend our lives in practice or commerce creating goals and operating within frameworks. We have checks and balances. We have plans. And we still have flair and entrepreneurship. Let’s keep that approach going to achieve our investment objectives. ❐

Author: Mike Lledo CA(SA) is the CEO at Consolidated Financial Planning