The secret to an award-winning investment strategy
The average South African has very little chance of being able to invest their savings in a way that will ensure that they get competitive long-term returns due to the complexity and expensive nature of the industry, says 10X Investments chief executive officer, Steven Nathan.
10X Investments’ award-winning investment strategy aims to change that by offering a simple single low-fee solution. Nathan says that what differentiates 10X from other managers is that the company has just one investment strategy and all its clients are invested in that strategy.
“We are able to provide people with a single solution that will deliver very competitive long-term returns at a fraction of the cost that most investors are paying.”
Nathan ventured out on his own after becoming disillusioned with the practices he saw from his front row seat as an analyst in the investment and retirement industry both in South Africa, and globally for more than a decade.
As a former managing director at Deutsche Bank in London, he spent a lot of time on the stock market analysing the listed financial services companies, essentially looking at all facets of the investment industry.
“As an investment professional, there is a body of knowledge, there is a profession of investing that teaches you to invest people’s money as long-term stewards of their money. When I entered the investment world I saw that it almost completely disregards the profession of investing and makes it the business of investing,” he said.
“The business of investing is for these companies to generate as much profit as they can for their shareholders, and often that comes at the expense of the individual investors.”
The chief executive noted that in South Africa, investing is expensive and very complex. “The combination means that most people get very poor value for their long-term savings, which is why 94% of South Africans can’t afford to retire.”
Drawing from his favourite quote, “think inside the box”, Nathan said the team at 10X sees one of the main problems as being an excess of choices, most of them too complex and expensive, and requiring the services of advisors to make sense of.
Advisors always add to the cost, he said, and frequently introduce a conflict of interest. “The result is that the average South African has got very little chance of being able to invest their savings in a way that will ensure that they get competitive long-term returns, that they pay low fees, and that they have transparency.”
“We founded 10X as an alternative to this complex industry with one objective, which is to say we want to give people the single best investment strategy for their long-term savings that will help them to retire adequately.”
The single best investment strategy means you are always risk-appropriately invested according to your time horizon, you always earn the market return, and you always pay low fees, the investment specialist said.
He noted that it is critical to grow your savings at a high rate for the vast majority of your savings period, “which is why you should invest your savings in a high equity fund”.
Part of the challenge in investing is that costs are incredibly high; most people pay advisor costs and platform fee costs and fund management costs, he said.
“At 10X we don’t charge any platform fees, or advisor fees, or distribution fees, and the management fees we do charge are much lower than active managers because we use index funds.”
So has 10X seen a shift in sentiment in South Africa, following the appointment of Cyril Ramaphosa?
“What we are seeing on the investment side is more of a willingness for people to retain their investments in South Africa,” Nathan said.
He said that a concern from about 2016 onward – with a combination of the weak rand and state capture, and the lack of confidence in the country – was that people were looking far more at having their investments housed outside of South Africa, not wanting to be exposed to the local economy.
“We saw people cashing in their South African investments, including their pension funds and their preservation funds.
“They were moving those savings abroad because of the lack of faith in the long-term future and investment outlook in South Africa. Moving into 2018, we have seen that reverse, there is much more confidence in SA,” the analyst said.
Nathan added that fewer people are talking about emigrating, financially or in person. And there has been less demand for international investments in their portfolios. “People are much more comfortable to have their savings managed in the South African environment.”
Looking ahead, Nathan said that the challenge in the lead up to an election year is the potential for populist policies, which may be good for pleasing voters but not for the economy.
“That is something to be aware of. But if you have the right people leading the country – both the overall leadership and the financial leadership – then you would imagine they would navigate challenges better than the previous incumbents, and we are very confident we have far better stewards in those positions,” he said.
Investment advice?
Nathan said that the 10X formula is to save 15% of your salary for your whole working life (40 years) and invest in a balanced high-growth index fund and, crucially, make sure you are paying fees of less than 1%.
“Don’t try be too clever … it is important to know what you don’t know, he said. “Keep it simple!”
He noted that with the internet there is so much information at your fingertips. “Do your research. You can read up on the likes of Buffet, Bogle, Fama and other experienced, smart and ethical people. Empower yourself by doing a little work.
“You have to make sure you understand what you are investing in, and the fees you are paying.”
Loading ...