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27px;padding-bottom: 54px;"> <!--[if (gte mso 9)|(IE)]> <table align="center" border="0" cellspacing="0" cellpadding="0" width="600" style="width:600px;"> <tr> <td align="center" valign="top" width="600" style="width:600px;"> <![endif]--> <table align="center" border="0" cellpadding="0" cellspacing="0" width="100%" class="templateContainer" style="border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;max-width: 600px !important;"> <tr> <td valign="top" class="bodyContainer" style="background:#transparent none no-repeat center/cover;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;background-color: #transparent;background-image: none;background-repeat: no-repeat;background-position: center;background-size: cover;border-top: 0;border-bottom: 0;padding-top: 0;padding-bottom: 0;"><table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnTextBlock" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody class="mcnTextBlockOuter"> <tr> <td valign="top" class="mcnTextBlockInner" style="padding-top: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <!--[if mso]> <table align="left" border="0" cellspacing="0" cellpadding="0" width="100%" style="width:100%;"> <tr> <![endif]--> <!--[if mso]> <td valign="top" width="600" style="width:600px;"> <![endif]--> <table align="left" border="0" cellpadding="0" cellspacing="0" style="max-width: 100%;min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;" width="100%" class="mcnTextContentContainer"> <tbody><tr> <td valign="top" class="mcnTextContent" style="padding-top: 0;padding-right: 18px;padding-bottom: 9px;padding-left: 18px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;word-break: break-word;color: #5b5b5b;font-family: Helvetica;font-size: 14px;line-height: 150%;text-align: left;"> <div style="text-align: center;">EDITION 2 | NOVEMBER 2018<br> </div> <div style="text-align: center;"><span style="color:#873F6F"><span style="font-size:32px">Do Financial Advisers Add Value?</span></span></div> <p style="text-align: center;margin: 10px 0;padding: 0;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;color: #5b5b5b;font-family: Helvetica;font-size: 14px;line-height: 150%;"><strong><span style="font-family:arial,helvetica neue,helvetica,sans-serif"><span style="font-size:16px">When financial markets deliver mediocre investment returns, the perennial reaction of financial journalists is to question whether there is value in financial advice. The related issue is whether there is any merit in utilizing active fund managers when by definition their average return cannot exceed the performance of relevant index after costs.</span></span></strong></p> </td> </tr> </tbody></table> <!--[if mso]> </td> <![endif]--> <!--[if mso]> </tr> </table> <![endif]--> </td> </tr> </tbody> </table><table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnDividerBlock" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;table-layout: fixed !important;"> <tbody class="mcnDividerBlockOuter"> <tr> <td class="mcnDividerBlockInner" style="min-width: 100%;padding: 18px 18px 0px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <table class="mcnDividerContent" border="0" cellpadding="0" cellspacing="0" width="100%" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <span></span> </td> </tr> </tbody></table> <!-- <td class="mcnDividerBlockInner" style="padding: 18px;"> <hr class="mcnDividerContent" style="border-bottom-color:none; border-left-color:none; border-right-color:none; border-bottom-width:0; border-left-width:0; border-right-width:0; margin-top:0; margin-right:0; margin-bottom:0; margin-left:0;" /> --> </td> </tr> </tbody> </table><table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnTextBlock" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody class="mcnTextBlockOuter"> <tr> <td valign="top" class="mcnTextBlockInner" style="padding-top: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <!--[if mso]> <table align="left" border="0" cellspacing="0" cellpadding="0" width="100%" style="width:100%;"> <tr> <![endif]--> <!--[if mso]> <td valign="top" width="600" style="width:600px;"> <![endif]--> <table align="left" border="0" cellpadding="0" cellspacing="0" style="max-width: 100%;min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;" width="100%" class="mcnTextContentContainer"> <tbody><tr> <td valign="top" class="mcnTextContent" style="padding-top: 0;padding-right: 18px;padding-bottom: 9px;padding-left: 18px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;word-break: break-word;color: #5b5b5b;font-family: Helvetica;font-size: 14px;line-height: 150%;text-align: left;"> <span style="font-size:14px">A good place to start in responding to these concerns is to determine the adviser’s value proposition. Before engaging with a client, we would typically determine their needs and expectations and explain our planning methodology and process so as to ensure that our mutual expectations of the relationship are compatible. <br> <br> Our value proposition is not our ability to chase investment returns, outperform markets or place winning bets on specific investment managers, securities, currencies or sectors. Rather, it is our experience and the professional stewardship that we are able to provide. Your financial plan is a blueprint for the holistic process of wealth creation, risk management and succession planning. Left to their own devices, people are often swayed by market sentiment or they lose focus and self-discipline without monitoring their progress or reassessing their goals and objectives. <br> <br> “Financial pornography” is the unflattering term that has been coined to describe misleading or sensational journalism. Haven’t we all read that if we can avoid paying exorbitant fees then we can achieve significantly higher payouts when our investments mature? Consider the following table:<br> <br> <img data-file-id="259545" height="260" src="https://gallery.mailchimp.com/cdd951e6a7a08b835a0f38a3f/images/191fe2ec-95d1-40ae-98c2-7c36f7490db0.png" style="border: 0px initial;width: 600px;height: 260px;margin: 0px;outline: none;text-decoration: none;-ms-interpolation-mode: bicubic;" width="600"></span><br> <br> If you are able to consistently achieve a 1% outperformance over a period of 20 years, then your investment proceeds will be 20% higher. If the differential increases to 3% over 30 years, then the enhancement in value increases to 135%.<br> <br> Outperformance is generated from two possible sources, namely higher returns or lower costs. Proponents of index funds would argue that investment is a zero sum game and their differentiator would be their lower associated costs. Our leading active fund managers would conversely argue that they have consistently outperformed at a level more than commensurate with their fees. <br> <br> Our own philosophy at Steward Capital is that it is essential to provide cost effective investment solutions for our clients without compromising the quality of our advice and service or the appropriateness of our investment solutions.<br> <br> According to recent research conducted by Vanguard, the value added by an adviser is not through market outperformance, but through asset allocation, rebalancing, tax-efficient investment strategies, cash flow management and coaching clients to change nothing at all (not deviate from the plan) in difficult times.<br> <br> A further observation by Vanguard is that sizable cash flows tend to follow investment performance. They quote the Goyal and Wahal survey of the performance of hired managers against fired managers for new inflows of $627BN and switches of $105BN respectively, over the period 1996-2003. The analysis concludes that the fired firms outperformed the hired firms over the subsequent one, two and three years. The obvious lesson is that current performance is not an accurate predictor of future returns.<br> <br> Behavioral finance teaches us that we are motivated by greed when markets rise and by fear when they fall. We tend to be risk averse when depressed markets present good buying opportunities and we need to exercise caution when markets are overvalued. Warren Buffet advises us to be fearful when others are greedy and greedy when others are fearful.<br> <br> The table below compares returns on bonds and shares for selected periods with the associated funds flows.<br> <br> <img data-file-id="259549" height="367" src="https://gallery.mailchimp.com/cdd951e6a7a08b835a0f38a3f/images/f6c6dc46-66ca-46fd-adc3-43c0a0385fca.png" style="border: 0px initial;width: 600px;height: 367px;margin: 0px;outline: none;text-decoration: none;-ms-interpolation-mode: bicubic;" width="600"><br> <br> The period 2008-12 is of particular interest as it evidenced an excessive flow of funds into the perceived safe haven of the bond market in the aftermath of the sub-prime crisis. It seems that the stable door was only closed after the horse had bolted. <br> <br> The positive funds flow into shares in 2014-15 would have augured well for the subsequent market rally, although the inflows were significantly lower than the previous outflows. <br> <br> Woe betide the investor who is swayed by market sentiment or the adviser who professes the ability to time investment markets. In the unlikely event that you do time the withdrawal of funds to correspond with a market correction, how likely is it that you will also time the subsequent re-entry to avoid missing the boat?<br> <br> Steward Capital offers a range of investment solutions that are tailored to the needs of our clients and fully aligned with our planning process. This is achieved by asset allocation based on the historical risk and reward characteristics of different asset types. We utilize independent research for the design of our investment solutions and selection of fund managers for different asset classes, with due regard to a range of factors including their style, process, volatility of returns and performance in different market conditions. We strive to attain the optimal blend of passive funds and active managers. The former capture market returns at a low cost, whilst the blending of styles with the latter help to reduce volatility and produce more dependable investment outcomes.<br> <br> In an uncertain world, the only constant is change. Let us be your financial steward and your anchor and assist you in maintaining the correct course as we navigate the uncertain road ahead. </td> </tr> </tbody></table> <!--[if mso]> </td> <![endif]--> <!--[if mso]> </tr> </table> <![endif]--> </td> </tr> </tbody> </table><table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnDividerBlock" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;table-layout: fixed !important;"> <tbody class="mcnDividerBlockOuter"> <tr> <td class="mcnDividerBlockInner" style="min-width: 100%;padding: 18px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <table class="mcnDividerContent" border="0" cellpadding="0" cellspacing="0" width="100%" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <span></span> </td> </tr> </tbody></table> <!-- <td class="mcnDividerBlockInner" style="padding: 18px;"> <hr class="mcnDividerContent" style="border-bottom-color:none; border-left-color:none; border-right-color:none; border-bottom-width:0; border-left-width:0; border-right-width:0; margin-top:0; margin-right:0; margin-bottom:0; margin-left:0;" /> --> </td> </tr> </tbody> </table><table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnCaptionBlock" style="border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody class="mcnCaptionBlockOuter"> <tr> <td class="mcnCaptionBlockInner" valign="top" style="padding: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <table align="left" border="0" cellpadding="0" cellspacing="0" class="mcnCaptionBottomContent" style="border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td class="mcnCaptionBottomImageContent" align="center" valign="top" style="padding: 0 9px 9px 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <img alt="" src="https://gallery.mailchimp.com/cdd951e6a7a08b835a0f38a3f/images/38f5898b-385c-437e-8ee6-8b511594d6fe.jpg" width="564" style="max-width: 1200px;border: 0;height: auto;outline: none;text-decoration: none;-ms-interpolation-mode: bicubic;vertical-align: bottom;" class="mcnImage"> </td> </tr> <tr> <td class="mcnTextContent" valign="top" style="padding: 0 9px 0 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;word-break: break-word;color: #5b5b5b;font-family: Helvetica;font-size: 14px;line-height: 150%;text-align: left;" width="564"> <br> <span style="font-size:18px"><strong>Many investors have a strong affinity for residential property investment. Quite often it forms the bulk of their investment portfolio. Property is tangible, unlike shares, and it is relatively easy to understand. Unlike shares. It is also within reach of most individuals where the bank will allow you to loan against it. Again, unlike shares.</strong></span><br> <br> So, when we review investor portfolios, and we see a significant bias towards property, we should question its value as an investment. To our minds it needs to compete for its space. Often it is the default option, with other investments – local and offshore shares for example, fighting over the scraps.<br> <br> Below we investigate the investment merit of residential property investment. Not too long ago one could have been lynched for simply raising the question. However, a few years of weaker growth, rising costs and political uncertainty provides us the opportunity to test this beloved asset class without the prejudice of past performance making the discussion moot.<br> <br> <strong>Some context.</strong><br> Recent memory points towards a past where property returns surpassed even the most bullish of equity portfolios. Since 1998, which is when property started making the news, domestic residential property, as measured by the ABSA House Price Index for Large properties, outperformed inflation by over 5% per year which is a significant number. Not as significant, however, when you consider the extent by which the return was magnified because most investors took on debt to finance the purchase. This meant they could earn a return on the full value of the property by putting down just a small percentage of its value, which could <em>double</em> their annualized return. This form of financial leverage was a significant creator of wealth in South Africa over the past 20 years, illustrated by the chart below:<br> <br> <img data-file-id="259565" height="283" src="https://gallery.mailchimp.com/cdd951e6a7a08b835a0f38a3f/images/d7ebd8d9-bbea-4f21-8524-023ac9fbaaa4.png" style="border: 0px initial;width: 600px;height: 283px;margin: 0px;outline: none;text-decoration: none;-ms-interpolation-mode: bicubic;" width="600"><br> <em>Chart 1: 1-year annualized price appreciation from property, after inflation</em><br> <br clear="all"> <br> However, when you take the full property experience of the past 50 years, the return after inflation is a mere 1.5% net per year. And importantly this is before you pay for: maintenance costs, rates and levies, utilities and the big ones: transfer costs and the estate agent fees. The average residential property holding period is generally expected to be between 7 and 9 years<a href="#_ftn1" name="_ftnref1" title="" style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;color: #873f6f;font-weight: bold;text-decoration: none;">[1]</a>, with each transfer consuming a significant part of the return, implying that for a long-term investor in property, costs are high. At this point we are skeptical of the sustainable level of return which property can achieve, and sense that the inherent investment risk may also be higher than expected.<br> <br> <strong>What has been driving our property market?</strong><br> There are a few key items which are critical in establishing a sound investment case for property: <ul> <li style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"><strong><em>The level of real interest rates</em></strong> (i.e., prevailing rates less inflation). When these rates are high, it is generally very negative for property investments as the cost of borrowing is high in relation to the general strength of the underlying economy. In the past (pre-2000’s) our Reserve Bank used the interest rate mechanism, via the repo rate, to help protect the currency. To do this they would raise interest rates aggressively to attract foreign investment, thereby strengthening the rand. The last significant (and futile) attempt at this was post the 1998 emerging market crisis where the rand weakened by 50% relative to the US$. In response, the Reserve Bank raised interest rates by 8% points, where Prime interest was 26% p.a! This was relatively ineffective and served only to plunge our economy into recession. However, this set the scene for the property boom to come, in that a) property was cheap, as the real interest rates were at historical highs, and b) the Reserve Bank decided to ditch the use of interest rates in protecting the currency and set about targeting a narrow band for inflation instead. This set in motion a decade long bull market in property, as interest rates declined, inflation declined, and the economy was strong.</li> </ul> <ul> <li style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"><strong><em>Supply and demand</em>.</strong> Unlike shares, property tends to have stronger supply and demand drivers. After all, there is limited quantity. The property bull market of the 1980’s was in part due to the release of additional erven by the government, feeding demand from the baby boomers<a href="#_ftn2" name="_ftnref2" title="" style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;color: #873f6f;font-weight: bold;text-decoration: none;">[2]</a>. On a micro scale we can see this effect in areas such as Cape Town (foreign ownership, and semi-gration from Gauteng and KZN), as well as cities such as Sydney, Hong Kong, New York and London where the attraction is strong and space is limited. In South Africa, the stability provided by an inflation targeting policy, as opposed to a volatile currency protection approach, drew many buyers into property creating significant new demand.</li> </ul> <ul> <li style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"><strong><em>The strength of the economy</em>.</strong> In general, if wealth levels are increasing, the base of potential buyers is increasing, and this creates support for the property market from an affordability perspective. During the boom from 1999 until 2008, SA’s GDP averaged over 4% real growth per year. Contrast this to today where we have been in structural decline for 10 years and are currently in recession (i.e. the economy is getting smaller). Currently we have weak conditions for property returns.</li> </ul> <strong>Offshore comparatives:</strong><br> Looking offshore, we can get a sense of what property can do when it doesn’t need to deal with currency protection and emerging market crises. Thirty-year average returns after inflation for the UK and Australia have averaged around 3%, which is a fair return but hardly exciting. In the US, this has been closer to 1% on average with the GFC unwinding all of the excess gains made prior to that time.<br> <br> <img data-file-id="259577" height="238" src="https://gallery.mailchimp.com/cdd951e6a7a08b835a0f38a3f/images/b1e628ea-5949-4a69-b1a2-7f57a3a5570b.png" style="border: 0px initial;width: 600px;height: 238px;margin: 0px;outline: none;text-decoration: none;-ms-interpolation-mode: bicubic;" width="600"><br> <em>Chart 2: Price appreciation after inflation for residential property in UK, US and Australia.</em><br> <br> <strong>Buy to let?</strong><br> Second or third properties bought with the intention of letting them out have been significant drivers of return due to relatively few buyers (those with access to finance) buying up properties in the boom times and renting out at decent yields. The chart below shows however that average rental returns may not be what they are initially expected to be, and again this is before costs, maintenance and taxes.<br> <br> <img data-file-id="259581" height="288" src="https://gallery.mailchimp.com/cdd951e6a7a08b835a0f38a3f/images/62ada0e6-1368-445c-8169-7446adb88cae.png" style="border: 0px initial;width: 600px;height: 288px;margin: 0px;outline: none;text-decoration: none;-ms-interpolation-mode: bicubic;" width="600"><br> <br> <em>Chart 3: Annual rental increases across South Africa</em><br> <br> Over the past 10 years (unfortunately data was not available for a longer analysis), rental escalations have been relatively poor across SA, except for the Western Cape. Escalations have generally been lower than inflation, in line with the weak economy. On average we would expect escalations in line with inflation for the average property. Without a significantly high starting yield (10% plus), it’s quite difficult to get excited by ‘buy to let’ as an investment.<br> <br> <strong>The Business Cycle</strong><br> The boom of the 2000’s was driven by sound economic policy, declining interest rates and a general global recovery post the dot-com bomb and the 9/11 terror attacks. Along with this optimism and higher levels of wealth and economic activity, came an escalation in debt levels as consumers acted on their higher confidence levels and used debt to buy property, amongst other items. By 2008, the SA consumer had amassed over 80% household debt relative to their disposable income (from an average of 50% historically) – the highest level reached, ever. Since this point, and in part due to the reluctance of banks to lend post the GFC, as well as the implementation of the National Credit Act, consumers have been reducing debt levels albeit to relatively high levels (currently 71% of disposable income).<br> <br> <img data-file-id="259585" height="325" src="https://gallery.mailchimp.com/cdd951e6a7a08b835a0f38a3f/images/76a5bc7b-54ce-4b1e-b201-abeee79111af.png" style="border: 0px;width: 600px;height: 325px;margin: 0px;outline: none;text-decoration: none;-ms-interpolation-mode: bicubic;" width="600"><br> <br> <em>Chart 4: 2000’s property boom driven by strong economic growth, low debt levels</em><br> <br> As we stand, the ability for consumers to ‘leverage up’ and support property prices is very limited. Without the tailwinds provided by a strong economy, the prospects will be below average. This does put those investors with significant capital at an advantage though: when the banking system is less inclined to lend (which is the case), and consumer protection and regulation create additional debt hurdles (also the case), the capital provider is in demand.<br> <br> <strong>Risk and Return: what to expect</strong><br> In 2000 or 2001, a residential property could be rented at out an annual gross yield of 15-20%. The subsequent step-change in property valuations (as a result of doing away with currency protection as a mandate for the Reserve Bank), as well as the strong economy and debt-fueled growth, drove property values higher. What this means is that the house which could be rented for a 15% yield in 2001, is now a 5% yield in 2018. Looking back at the return drivers: <ul> <li style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"><strong><em>Real interest rates</em>:</strong> currently high, as CPI remains low due to weak growth, and interest rates remain high due to supply and demand dynamics with the banks. This is negative for property but should create opportunities as prices reduce.</li> <li style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"><strong><em>Supply and demand</em>:</strong> as a general rule, demand levels nationally are weak, reflected in lower rental escalations, new building activity and declining prices. In certain niche areas (Atlantic Seaboard for example), the underpin for demand has always been strong as foreign investors have been able to buy when locals can’t, however even this segment has weakened.</li> <li style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"><strong><em>Business Cycle</em>: </strong> having just entered technical recession it’s hard to say the economy is going to be supportive of property investing. Hopefully though, we are nearer to the recovery than to the decline. </li> </ul> In most liquid investments, prices would reflect this gloomy outlook, creating an investment opportunity. Less so with property, where the fixed nature of it makes transferability and price discovery more elusive. Prices are therefore ‘sticky’, and prospective sellers will hold back hoping for the recovery (in Cape Town this is simply seen as ‘summer’). The behavioural bias of anchoring<a href="#_ftn3" name="_ftnref3" title="" style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;color: #873f6f;font-weight: bold;text-decoration: none;">[3]</a> is hard at work here.<br> Stepping outside of our current situation, we can assess long term residential property returns along these lines:<br> In a normal world where the economy is working, and the consumer is not overly stretched, support for property will persist. Unlike shares which have variable products and services which need to adapt and evolve over time, the use for property does not change. <br> <br> With a starting income yield of around 6%, escalations of inflation minus a bit, a significant level of costs to be incurred, it is not difficult to see that the investment case for residential property is quite speculative, and at best, a lower return option than equities. Where it does make sense is where: <ol style="list-style-type:lower-alpha;"> <li style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;">Significant financing of the property allows the return profile to ratchet up to a more attractive level. Contrast this with a fully paid off property (for example someone in retirement) – a substantial amount of capital tied up, earning a low return, with no income distribution and high costs.</li> <li style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;">It is a ‘unique’ opportunity, and there is the ability to add value to a property, materially changing its valuation profile. But beware of the property bull market, where everyone can play and the market quickly becomes saturated.</li> <li style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;">Opportunistic market timing: where a suburb rerates, or where there is a supply and demand based rebalance.</li> <li style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;">Strong economic recovery: simply where you are able to access a property relatively cheaply, ahead of a strong economic recovery. The time to be looking then is when the market is low, sentiment is negative, and the early signs of recovery are in place.</li> </ol> Reading through these strategies, property starts to look quite high risk. Taken in context, it is an undiversified, illiquid, immovable asset, subject to the laws of the land, and quite often geared up with debt. For this reason, we believe it should be placed in the “high risk” part of an investment portfolio. In most cases, a diversified portfolio of shares will be a preferable investment over the long term, with higher returns, lower costs, tax efficiency and liquidity. For unleveraged properties, it is likely there are better alternatives offering both higher yields and capital returns when costs and tax are considered.<br> <br> Credit to Fundhouse for the article. <div> <hr align="left" size="1" width="33%"> <div id="ftn1"><span style="font-size:12px"><a href="#_ftnref1" name="_ftn1" title="" style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;color: #873f6f;font-weight: bold;text-decoration: none;">[1]</a> Lightstone</span></div> <div id="ftn2"><span style="font-size:12px"><a href="#_ftnref2" name="_ftn2" title="" style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;color: #873f6f;font-weight: bold;text-decoration: none;">[2]</a> Rode, 2003</span></div> <div id="ftn3"><span style="font-size:12px"><a href="#_ftnref3" name="_ftn3" title="" style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;color: #873f6f;font-weight: bold;text-decoration: none;">[3]</a> Anchoring – waiting for a price at least as high as what you paid, despite what your property may be worth</span><br> </div> </div> </td> </tr> </tbody></table> </td> </tr> </tbody> </table><table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnDividerBlock" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;table-layout: fixed !important;"> <tbody class="mcnDividerBlockOuter"> <tr> <td class="mcnDividerBlockInner" style="min-width: 100%;padding: 27px 18px 0px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <table class="mcnDividerContent" border="0" cellpadding="0" cellspacing="0" width="100%" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <span></span> </td> </tr> </tbody></table> <!-- <td class="mcnDividerBlockInner" style="padding: 18px;"> <hr class="mcnDividerContent" style="border-bottom-color:none; border-left-color:none; border-right-color:none; border-bottom-width:0; border-left-width:0; border-right-width:0; margin-top:0; margin-right:0; margin-bottom:0; margin-left:0;" /> --> </td> </tr> </tbody> </table><table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnTextBlock" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody class="mcnTextBlockOuter"> <tr> <td valign="top" class="mcnTextBlockInner" style="padding-top: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <!--[if mso]> <table align="left" border="0" cellspacing="0" cellpadding="0" width="100%" style="width:100%;"> <tr> <![endif]--> <!--[if mso]> <td valign="top" width="600" style="width:600px;"> <![endif]--> <table align="left" border="0" cellpadding="0" cellspacing="0" style="max-width: 100%;min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;" width="100%" class="mcnTextContentContainer"> <tbody><tr> <td valign="top" class="mcnTextContent" style="padding-top: 0;padding-right: 18px;padding-bottom: 9px;padding-left: 18px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;word-break: break-word;color: #5b5b5b;font-family: Helvetica;font-size: 14px;line-height: 150%;text-align: left;"> <span style="font-size:18px"><strong><span style="color:#873f6f">TEAM NEWS</span></strong></span><br> <br> <img data-file-id="259625" height="150" src="https://gallery.mailchimp.com/cdd951e6a7a08b835a0f38a3f/images/43472d2f-383e-41ef-94bb-1449272f4e9a.png" style="border: 0px initial;width: 150px;height: 150px;margin: 0px;outline: none;text-decoration: none;-ms-interpolation-mode: bicubic;" width="150"><br> <br> <span style="font-size:18px"><strong>We are proud to announce that Charleen van Emmenis has successfully completed the Financial Planning Board Exam and now holds the professional designation of Certified Financial Planner ® or CFP® for short.</strong></span><br> <br> Charleen has been with us for 6 years and during that time has committed herself to improving her technical knowledge and skills working towards achieving her professional designation.<br> <br> The CFP® mark is the international professional designation for financial planners administered out of New York under the local custodianship of the Financial Planning Institute (FPI) in South Africa.<br> <br> Candidates have to do a post grad honours level course and then write the Financial Planning Board Exam to gain the professional designation. The board exam is a challenging exam that generally has less than a 50% pass rate.<br> <br> We now have 4 professional financial planners in the firm with a total staff head count of 7! </td> </tr> </tbody></table> <!--[if mso]> </td> <![endif]--> <!--[if mso]> </tr> </table> <![endif]--> </td> </tr> </tbody> </table></td> </tr> </table> <!--[if (gte mso 9)|(IE)]> </td> </tr> </table> <![endif]--> </td> </tr> <tr> <td align="center" valign="top" id="templateFooter" data-template-container="" style="background:#333333 none no-repeat center/cover;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;background-color: #333333;background-image: none;background-repeat: no-repeat;background-position: center;background-size: cover;border-top: 0;border-bottom: 0;padding-top: 45px;padding-bottom: 63px;"> <!--[if (gte mso 9)|(IE)]> <table align="center" border="0" cellspacing="0" cellpadding="0" width="600" style="width:600px;"> <tr> <td align="center" 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<tr> <td align="center" valign="top" style="padding: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;" class="mcnFollowBlockInner"> <table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnFollowContentContainer" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td align="center" style="padding-left: 9px;padding-right: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <table border="0" cellpadding="0" cellspacing="0" width="100%" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;" class="mcnFollowContent"> <tbody><tr> <td align="center" valign="top" style="padding-top: 9px;padding-right: 9px;padding-left: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <table align="center" border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td align="center" valign="top" style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <!--[if mso]> <table align="center" border="0" cellspacing="0" cellpadding="0"> <tr> <![endif]--> <!--[if mso]> <td align="center" valign="top"> <![endif]--> <table align="left" border="0" cellpadding="0" cellspacing="0" style="display: inline;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td valign="top" style="padding-right: 10px;padding-bottom: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;" class="mcnFollowContentItemContainer"> <table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnFollowContentItem" style="border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td align="left" valign="middle" style="padding-top: 5px;padding-right: 10px;padding-bottom: 5px;padding-left: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <table align="left" border="0" cellpadding="0" cellspacing="0" width="" style="border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td align="center" valign="middle" width="24" class="mcnFollowIconContent" style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <a href="http://www.facebook.com" target="_blank" style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"><img src="https://cdn-images.mailchimp.com/icons/social-block-v2/outline-light-facebook-48.png" style="display: block;border: 0;height: auto;outline: none;text-decoration: none;-ms-interpolation-mode: bicubic;" height="24" width="24" class=""></a> </td> </tr> </tbody></table> </td> </tr> </tbody></table> </td> </tr> </tbody></table> <!--[if mso]> </td> <![endif]--> <!--[if mso]> <td align="center" valign="top"> <![endif]--> <table align="left" border="0" cellpadding="0" cellspacing="0" style="display: inline;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td valign="top" style="padding-right: 10px;padding-bottom: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;" class="mcnFollowContentItemContainer"> <table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnFollowContentItem" style="border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td align="left" valign="middle" style="padding-top: 5px;padding-right: 10px;padding-bottom: 5px;padding-left: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <table align="left" border="0" cellpadding="0" cellspacing="0" width="" style="border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td align="center" valign="middle" width="24" class="mcnFollowIconContent" style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <a href="http://www.twitter.com/" target="_blank" style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"><img src="https://cdn-images.mailchimp.com/icons/social-block-v2/outline-light-twitter-48.png" style="display: block;border: 0;height: auto;outline: none;text-decoration: none;-ms-interpolation-mode: bicubic;" height="24" width="24" class=""></a> </td> </tr> </tbody></table> </td> </tr> </tbody></table> </td> </tr> </tbody></table> <!--[if mso]> </td> <![endif]--> <!--[if mso]> <td align="center" valign="top"> <![endif]--> <table align="left" border="0" cellpadding="0" cellspacing="0" style="display: inline;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td valign="top" style="padding-right: 10px;padding-bottom: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;" class="mcnFollowContentItemContainer"> <table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnFollowContentItem" style="border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td align="left" valign="middle" style="padding-top: 5px;padding-right: 10px;padding-bottom: 5px;padding-left: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <table align="left" border="0" cellpadding="0" cellspacing="0" width="" style="border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td align="center" valign="middle" width="24" class="mcnFollowIconContent" style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <a href="http://www.instagram.com/" target="_blank" style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"><img src="https://cdn-images.mailchimp.com/icons/social-block-v2/outline-light-instagram-48.png" style="display: block;border: 0;height: auto;outline: none;text-decoration: none;-ms-interpolation-mode: bicubic;" height="24" width="24" class=""></a> </td> </tr> </tbody></table> </td> </tr> </tbody></table> </td> </tr> </tbody></table> <!--[if mso]> </td> <![endif]--> <!--[if mso]> <td align="center" valign="top"> <![endif]--> <table align="left" border="0" cellpadding="0" cellspacing="0" style="display: inline;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td valign="top" style="padding-right: 0;padding-bottom: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;" class="mcnFollowContentItemContainer"> <table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnFollowContentItem" style="border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td align="left" valign="middle" style="padding-top: 5px;padding-right: 10px;padding-bottom: 5px;padding-left: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <table align="left" border="0" cellpadding="0" cellspacing="0" width="" style="border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td align="center" valign="middle" width="24" class="mcnFollowIconContent" style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <a href="http://mailchimp.com" target="_blank" style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"><img src="https://cdn-images.mailchimp.com/icons/social-block-v2/outline-light-link-48.png" style="display: block;border: 0;height: auto;outline: none;text-decoration: none;-ms-interpolation-mode: bicubic;" height="24" width="24" class=""></a> </td> </tr> </tbody></table> </td> </tr> </tbody></table> </td> </tr> </tbody></table> <!--[if mso]> </td> <![endif]--> <!--[if mso]> </tr> </table> <![endif]--> </td> </tr> </tbody></table> </td> </tr> </tbody></table> </td> </tr> </tbody></table> </td> </tr> </tbody> </table><table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnDividerBlock" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;table-layout: fixed !important;"> <tbody class="mcnDividerBlockOuter"> <tr> <td class="mcnDividerBlockInner" style="min-width: 100%;padding: 18px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <table class="mcnDividerContent" border="0" cellpadding="0" cellspacing="0" width="100%" style="min-width: 100%;border-top: 2px solid #505050;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <span></span> </td> </tr> </tbody></table> <!-- <td class="mcnDividerBlockInner" style="padding: 18px;"> <hr class="mcnDividerContent" style="border-bottom-color:none; border-left-color:none; border-right-color:none; border-bottom-width:0; border-left-width:0; border-right-width:0; margin-top:0; margin-right:0; margin-bottom:0; margin-left:0;" /> --> </td> </tr> </tbody> </table><table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnTextBlock" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody class="mcnTextBlockOuter"> <tr> <td valign="top" class="mcnTextBlockInner" style="padding-top: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <!--[if mso]> <table align="left" border="0" cellspacing="0" cellpadding="0" width="100%" style="width:100%;"> <tr> <![endif]--> <!--[if mso]> <td valign="top" width="600" style="width:600px;"> <![endif]--> <table align="left" border="0" cellpadding="0" cellspacing="0" style="max-width: 100%;min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;" width="100%" class="mcnTextContentContainer"> <tbody><tr> <td valign="top" class="mcnTextContent" style="padding-top: 0;padding-right: 18px;padding-bottom: 9px;padding-left: 18px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;word-break: break-word;color: #FFFFFF;font-family: Helvetica;font-size: 12px;line-height: 150%;text-align: center;"> <em>Copyright © *|CURRENT_YEAR|* *|LIST:COMPANY|*, All rights reserved.</em> <br> *|IFNOT:ARCHIVE_PAGE|* *|LIST:DESCRIPTION|* <br> <br> <strong>Our mailing address is:</strong> <br> *|HTML:LIST_ADDRESS_HTML|* *|END:IF|* <br> <br> Want to change how you receive these emails?<br> You can <a href="*|UPDATE_PROFILE|*" style="mso-line-height-rule: exactly;-ms-text-size-adjust: 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