October 2022 – Monthly Newsletter

What’s happening?

“There will always be bull markets followed by bear markets followed by bull markets”- Sir John Templeton.

Every few years we need to remind investors that investments have up and down cycles. Let’s take a look at the last two years as an example. Despite all the bad news unit trusts generally performed very well. Let’s look at the returns for some South African unit trust sectors for the years ending December 2021:

These were excellent performances! Clearly, the place to be invested was not the money market.

Reasons to be optimistic!

So how has this year been so far?

The Johannesburg Stock Exchange All Share Index has declined by -3.7%. This is certainly not catastrophic!

The MSCI All Country World Index has declined by -23.4% in US Dollars. This is the bargain of the decade! Investors can now buy shares and unit trust funds at +/- 23% cheaper than a year ago. Many of the local fund managers have actively been increasing their offshore holdings in global shares to take advantage of the cheap prices and diversify their portfolios.

In many ways, a decline in the market is good news. Markets need to take a “breather”. In fact, when a market declines it presents great opportunities for fund managers to select shares that are now trading at cheaper levels.

The world is made up of “up” and “down” cycles. Stock markets go up and down, once all the dust has settled markets will go up again!

Declines in the stock market are quite normal and should not be regarded with fear! We, at Kevin Mills Financial Services, have always made it abundantly clear that markets go up as well as down. From time to time all markets decline. This is quite normal and part of the dynamic of any stock market. The important thing to realise is that this is not some cataclysmic event! It is quite, quite normal.

For those investing in South African Income funds, there is good news. The forward yield expectation is that income funds should produce a return of between 8% and 9% over the next twelve months. [this is not guaranteed but is the consensus.]

So, what should investors do? There are some investment rules that should be blindingly obvious!

Investors should keep investing through good times and bad. The best opportunities usually occur when markets have declined, and the news is most pessimistic.
Stick to your investment plan. Declines in the stock market are quite normal.
Don’t buy high and sell low. This is irrational and guarantees losses! In fact, it is crazy behavior!
Ignore all the noise in the market from people who don’t understand the market.
You have probably invested with fund managers that are rational, competent, experienced, and who have spent an enormous amount of time studying the markets. Trust them.

“The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”– Sir John Templeton.

The importance of doing nothing!

The above slide is courtesy of Ninety One.

May 2022 – Monthly Newsletter

Investments in uncertain times!

Over the past three years the Johannesburg Stock Exchange All Share Index has performed well. Last year the Index had its best performance since the crash in 2008! The table below reflects the performance of the Index over the past three years.

JSE ALSI returns
2019	12.0 %
2020	7.0 %
2021	29.2 %
2022 (Year to date)	-8.62 %

The South African market is heavily influenced by world events and the recent uncertainty regarding the Russian invasion of Ukraine, the lockdown of the China economy again, rising interest rates, increases in global inflation and the cost of living and the ongoing COVID pandemic have negatively affected the South African market. South Africa, of course, has its fair share of domestic concerns – corruption, maladministration, unemployment, the devastation of the Kwazulu-Natal floods, and Eskom turning off the lights again, and again, and again, all take a toll on the domestic economy.

All these factors make for worrying times for investors. Many investors are currently very anxious regarding the declines experienced on the Johannesburg Stock Exchange over the past quarter. Whilst it is never easy seeing declines in a portfolio, investors are reminded that stock markets never go up in a straight line.

The world consists of “up” and “down” cycles. Stock markets go up and down, the property market is buoyant and then stagnant. Once all the dust has settled markets will go up again!

Declines in the stock market are quite normal and should not be regarded with fear! We, at Kevin Mills Financial Services, have always made it abundantly clear that markets go up as well as down! From time to time all markets decline! This is quite normal and part of the dynamic of any stock market. It is quite, quite normal.

Volatility in the market presents opportunities for Fund Managers to purchase shares that they believe will provide superior long term returns at reduced prices. Short-term market uncertainty offers long-term investors a great entry point into the market.

It is human nature to be anxious and worried about what the future may hold and unfortunately, we cannot predict a “silver lining.” However, investors should not lose sight of their investment goals in times of uncertainty.

So, what should investors do?

Stick to your investment plan. Declines in the stock market are quite normal.
Don’t buy high and sell low. That is irrational and guarantees losses!
Ignore all the noise in the market from people who don’t understand the markets.
You have probably invested with fund managers that are rational, competent, experienced and who have spent an enormous amount of time studying the markets. Trust them

“If You cannot control your emotions, you cannot control your money!” Warren Buffet

Marriott First World Hybrid Real Estate Fund

For investors looking to diversify their investments, we continue to favour offshore markets as a way of protecting your capital and providing inflation beating returns in the long run.

The Marriott First World Hybrid Real Estate Fund is a direct real estate portfolio of UK warehousing and regional offices as well as listed REITS, generating a reliable, growing income.

The objective of this Fund is to combine the benefits of direct and listed First World real estate to generate a reliable, predictable and growing income. With the majority of the return generated from the income yield, the investment outcome can be anticipated with a reasonable degree of certainty.

The fund’s primary focus is to provide investors with a predictable level of income. The fund has an income yield of 4.5% in Sterling and is anticipated to provide investors with returns of 6 – 7% in Sterling per annum.

“Real estate investing, even on a very small scale, remains a tried-and-true means of building an individual’s cash flow and wealth.” – Robert Kiyosaki.