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EACH week we ask an expert to allocate a hypothetical lump sum of R1m in his or her field. Investment ideas range from the stock market to stamps.
This week we get tips from two experts on equities and art.
Schalk Louw, head of Contego Asset Management:
What would I do with R1m in the current investment environment? For my current risk profile I would most probably invest the full R1m in equity, purely because I would not need any income from my investment and could tolerate some interim price fluctuations.
My need is maximum long-term capital growth. With money market rates at roughly 5% and bond yields at 8.7%, the growth prospects in the equity market at 13% (consensus forecasts) are definitely a lot more attractive.
Rather than just buying the whole market or an indexed ETF (exchange-traded fund), I would focus my investment on five shares: Anglo Platinum, Aspen, Billiton, Naspers and Old Mutual.
Angloplat would grab 15% of my portfolio's attention, and in my view is one of the stocks with the best upside potential. Taking note of Angloplat's continued underperformance of late, I do expect a correction in the near future.
I would invest 20% of my portfolio in Aspen, which at current levels does not reflect the inherent value or upside potential of the company's current operations.
BHP Billiton, the largest company listed on the JSE by market value, would get 30% of my total capital. It is committed to growth, with various projects in the pipeline, and has continued to provide investors with excellent value.
One of the more exciting companies, Naspers, would get 15% of my total invested capital. It offers solid growth potential and the recent drop in the share price has only created an even more attractive point of entry. My financial stock, Old Mutual, would get 20% of my investment. It offers solid value and includes a strong possibility of further upside surprises.
The more risk-averse investor could potentially reduce their exposure to these five shares and add ZGovi's (a Government Bond ETF) and JOZI03 retail bonds (expiring September 2012) to their portfolio, which would give investors around 0.40% more than Johannesburg Interbank Rate (JIBAR).
If you invested 40% of your capital 15 years ago in equities, 40% in bonds and 20% in money market instruments, you would have been able to withdraw 5% of your capital per year as income (done on the first day of every year), without seeing any capital loss in any full year while still enjoying an average growth in income of 9.3% per annum.
Users requiring a similar income distribution could invest 40% of their capital in ZGovi's, 20% in JOZI03 and the remaining 40% split in the above-mentioned share weighting, giving them potential growth and capital preservation simultaneously.
By following this route, my capital is firstly highly focused and - more importantly - free of any excessive fees and costs.
Charl Bezuidenhout, owner of the Worldart-gallery in Cape Town:
If I had R1m to spend on art, and with an investment goal in mind, I would consider an obvious and safe option like William Kentridge.
For more established art, I would consider the members of the old SA master class like Alexis Preller and Cecil Skotnes.
If you wanted to invest the same amount in emerging artists instead, the best strategy would be to spread your money out on the works of 10 artists who maintained a high profile.
For art to work as an investment, it is best to play it safe. Art isn't the type of investment which will yield you a big profit overnight.
In the main, it involves the acquisition of established, well-known artists. Keep to the type of work that is typical of their oeuvre. Consult reputable art dealers over possible options and get second opinions from other traders or sources.
If you are more adventurous, there are a number of extra rules. Look at the background of the artist – training, years involved in the industry, previous exhibitions and so forth. It is important that the person is a full-time artist. The artist should be active and if the person collaborated with other well-known artists with a good reputation, your investment will be safer.
Concerning art as an investment, remember that art isn't like shares which you can sell at any time. The selling process takes time and depends on whether there is a seller at that specific point in time who is willing to buy the work.
The value of the work is a grey area and can be subject to commission paid to the seller.
Art doesn't make any money while you own it - in fact, it may cost you money including, for example, insurance.
- Fin24
This week we get tips from two experts on equities and art.
Schalk Louw, head of Contego Asset Management:
What would I do with R1m in the current investment environment? For my current risk profile I would most probably invest the full R1m in equity, purely because I would not need any income from my investment and could tolerate some interim price fluctuations.
My need is maximum long-term capital growth. With money market rates at roughly 5% and bond yields at 8.7%, the growth prospects in the equity market at 13% (consensus forecasts) are definitely a lot more attractive.
Rather than just buying the whole market or an indexed ETF (exchange-traded fund), I would focus my investment on five shares: Anglo Platinum, Aspen, Billiton, Naspers and Old Mutual.
Angloplat would grab 15% of my portfolio's attention, and in my view is one of the stocks with the best upside potential. Taking note of Angloplat's continued underperformance of late, I do expect a correction in the near future.
I would invest 20% of my portfolio in Aspen, which at current levels does not reflect the inherent value or upside potential of the company's current operations.
BHP Billiton, the largest company listed on the JSE by market value, would get 30% of my total capital. It is committed to growth, with various projects in the pipeline, and has continued to provide investors with excellent value.
One of the more exciting companies, Naspers, would get 15% of my total invested capital. It offers solid growth potential and the recent drop in the share price has only created an even more attractive point of entry. My financial stock, Old Mutual, would get 20% of my investment. It offers solid value and includes a strong possibility of further upside surprises.
The more risk-averse investor could potentially reduce their exposure to these five shares and add ZGovi's (a Government Bond ETF) and JOZI03 retail bonds (expiring September 2012) to their portfolio, which would give investors around 0.40% more than Johannesburg Interbank Rate (JIBAR).
If you invested 40% of your capital 15 years ago in equities, 40% in bonds and 20% in money market instruments, you would have been able to withdraw 5% of your capital per year as income (done on the first day of every year), without seeing any capital loss in any full year while still enjoying an average growth in income of 9.3% per annum.
Users requiring a similar income distribution could invest 40% of their capital in ZGovi's, 20% in JOZI03 and the remaining 40% split in the above-mentioned share weighting, giving them potential growth and capital preservation simultaneously.
By following this route, my capital is firstly highly focused and - more importantly - free of any excessive fees and costs.
Charl Bezuidenhout, owner of the Worldart-gallery in Cape Town:
If I had R1m to spend on art, and with an investment goal in mind, I would consider an obvious and safe option like William Kentridge.
For more established art, I would consider the members of the old SA master class like Alexis Preller and Cecil Skotnes.
If you wanted to invest the same amount in emerging artists instead, the best strategy would be to spread your money out on the works of 10 artists who maintained a high profile.
For art to work as an investment, it is best to play it safe. Art isn't the type of investment which will yield you a big profit overnight.
In the main, it involves the acquisition of established, well-known artists. Keep to the type of work that is typical of their oeuvre. Consult reputable art dealers over possible options and get second opinions from other traders or sources.
If you are more adventurous, there are a number of extra rules. Look at the background of the artist – training, years involved in the industry, previous exhibitions and so forth. It is important that the person is a full-time artist. The artist should be active and if the person collaborated with other well-known artists with a good reputation, your investment will be safer.
Concerning art as an investment, remember that art isn't like shares which you can sell at any time. The selling process takes time and depends on whether there is a seller at that specific point in time who is willing to buy the work.
The value of the work is a grey area and can be subject to commission paid to the seller.
Art doesn't make any money while you own it - in fact, it may cost you money including, for example, insurance.
- Fin24
