Many South Africans feel that their future, like the present, is out of their control because of the government’s maladministration, many shocking findings from the various commissions of inquiry, and fears about land expropriation.
Many South Africans’ confidence in the country and its economy has taken a knock, leaving them reluctant to save or invest long-term. With the upcoming elections in mind, many are even more hesitant to invest.
The country has also seen rather low GDP growth over the past few years, and when you add that to high unemployment rates, it becomes clear that this is not an ideal environment for investment.
Steven Nathan, founder and CEO of the disruptive asset manager 10X Investments, points out that people’s hesitance to invest is understandable as the country is knee-deep in debt, while corruption and maladministration keeps draining the country’s savings. But he warns that people should not base long-term decisions on short-term concerns.
Blinded by short-termism
According to Nathan, because we’re in an uncertain, negative environment, ordinary South Africans are blinded by short-termism. From an investment point of view this is concerning, as people aren’t actively creating long-term wealth and contributing to the economy.
“As humans, we’re conditioned to put a lot of emphasis on the recent past. When things have been really great over the last 6 months, we think it’s going to be great forever, and when things are really lousy, we think it’ll be lousy forever.
This is the wrong mindset to have. South Africans’ saving and retirement planning is very much in their own hands. They must simply become more informed.
“Success is built over decades, not over months. To start building, we need to evaluate what can be controlled, and how the future can be secured. This also means being constructive and positive by focusing on saving. We can all have some influence on our country, with a medium-term outlook,” said Nathan.
“In the last 2-3 years, we’ve also seen far less saving in SA, and more demand for saving outside of the country. While it’s not a bad thing to invest in other markets, less investments in the country means less growth,” he added.
One option for reluctant South African investors is to invest in the JSE, for example, as 50% of that investment will receive offshore exposure, meaning they won’t only get exposure in South Africa.
Another positive is that we now have a more open dialogue with government, which we’ve previously never had. “This is because President Ramaphosa has a good relationship with business, and so we’re already in a much better space,” said Nathan.
Where to start
Despite what’s going on with the government and the economy, the financial services industry is guilty of confusing people by making saving and investing very complex. For ordinary investors, even just investing for retirement or saving for a child’s education has become intimidating and confusing because of the multitude of products available.
Nathan said that as a starting point, investors need to know what value they are getting for their investments and whether it is competitive or not. What matters, he says, is the fees you pay and the return you earn.
“Unfortunately, most people have no idea what that is and, of course, their ignorance is any retirement fund manager’s bliss,” he said. “All in all, South Africans are getting poor value for their money.”
10X Investments offers a simple, low cost, transparent product that eliminates complexity, high fees, and underperforming fund managers.
“We use index funds, which have been shown to outperform about 80% of actively managed funds in South Africa, and so we’re giving people a simple low-cost solution that delivers competitive returns,” said Nathan.
The combination of competitive returns and low fees, especially when compounded over the years, means that you will end up with much more money. “The average total fee in South Africa is 3%, while 10X charges only 1%. This means you save 2% on fees, which when compounded over a savings lifetime, means you could end up with 60% more at retirement.”
“The main difference is that we give you a solution without any options. We give you our single best portfolio,” said Nathan.
Another problem with retirement saving is that people don’t know how much they will need, what they need to be saving to get there and if they are on track.
10X Investments’ online retirement calculators, which are free to use, solve this problem. Input your basic numbers and the calculator will create a simple, unique plan for you.
Their policy of simplifying the options and giving people just the one choice, is surely what people want: simply the best investment view and the best possible chance to retire with dignity.