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How painful can things get?

Dr Francois Stofberg
Senior economist and head of sales: Efficient Private Clients

Last week, the United States (US) Federal Reserve (Fed) increased interest rates by 0.75% for the third consecutive time this year. Interest rates in the US now range between 3% and 3.25%, and many expect that rates will, most likely, increase to 4.40% by the end of the year. Fed Chairman, Jerome Powell, made it clear that they are willing to do whatever it takes to ensure that inflation is brought under control. He also made it clear that this includes allowing the economy to have a hard landing, that is, entering a painful and potentially deep recession. But how painful can things get, and what does this mean for long-term investment decisions?

What we can learn from history is that markets in the US usually bottom out three to six months before the economy does. The reason for this is because markets anticipate and then price in future events. The question thus arises: When will the US economy bottom out? For this, we can, once again, look to the past. Of course, history does not repeat itself exactly, therefore, we should be aware of the shortcomings when interpreting today’s developments through the lens of historic data. That being said, even though history might not repeat itself, it does often rhyme, and, for many reasons, it seems as though history will, once again, rhyme in the US.

Usually, recessions in the US last between 18 and 24 months, and, based on data, we know that the US is already in a technical recession. The US has been recessionary since January 2022 and entered a technical recession in July, after data confirmed that the country experienced two consecutive quarters of negative growth. Fast-forward 18 to 24 months and this means that the US will probably emerge from their recession sometime between the third quarter of 2023 and the first quarter of 2024. In this scenario, US markets should bottom out in the first half of 2023. Consequently, we continue to urge our clients to ready themselves and to take advantage of this investment opportunity of a lifetime.

But what does ‘ready yourself’ mean? Readying yourself does not mean waiting until the markets collapse, because the markets have a funny way of not always doing what we expect. Readying yourself does mean doing the necessary admin to ensure that you will be ready to invest. It means considering where the markets are, where the rand is trading at, and what your base-case scenario is. From here, prudent investors dollar-cost average (DCA) into their positions over a certain period. If it is retirement money that you are already dollar-cost averaging into your investment each month, please do not stop. If it is discretionary money that you want to invest now, it is good to DCA over a three- to six-month period, as the abovementioned is considered: The current market, the rand, and your base case.

It is worthwhile to mention that we do not believe that the US will enter a depression, where the economy remains recessionary for a protracted period. Usually, in a depression, a combination of consumer, business, and investor sentiment is almost wiped out and economic momentum is lost. We are, however, concerned that the European Union (EU) might enter a depressive period because, unlike the US, they are unwilling to force their economy into a recession that can re-allocate scarce capital to more productive uses; a process that is commonly referred to as ‘creative destruction’. What the EU is doing is likened to what Japan did that led to their zombie-like economy: They are trying to keep everything afloat, trying not to allow economic pain. Unfortunately, everything that is good, is growing, and everything that is growing will experience growth pains. If the EU does enter a depression, it will, most likely, lead to even greater support for the US dollar, equities, and bonds. Make sure that you do not miss out on this unique, long-term investment opportunity!

Effective Investment Management Services

Effective Investment Management Services

Never put all your eggs in one basket. It’s an age-old saying that has truth in every word. You’ve done well for yourself, and the eggs in your basket are growing significantly by the quarter. You may even have diversified funds into a few business ventures and other intelligent decisions that are maturing nicely. However, at some point, you might want to consider employing a company that offers Investment Management Services.

If you’re not fully skilled at being able to do it yourself, get a professional to do it. A business analogy that you may want to take heed of. It’s not that you can’t take care of your financial portfolio, but like so many other operating functions in other areas of your business and personal life, you would need to learn to designate people you can trust to do it. When it comes to financial risk, investment management services may be the professionals you might want to trust.

Don’t Hesitate – Delegate

In many sports, there are simply some things that can’t be done solo. Scuba diving is one good example. The professionals will always advise you to never risk diving alone. Always take a partner, preferably one with more experience than yourself, and someone you can trust. In the event of an emergency, or unforeseen obstacles or incidents, you can get assistance with resurfacing. It’s very similar when comparing it with your financial portfolio and investment management services.

It is always wise to follow this advice to avoid risk, or even catastrophic consequences, regardless of how much experience you have accumulated. Likewise, the rest of your life is not a high-risk game of chance. Because only one or two ill-advised financial decisions could set you back months, if not years, would you really want to chance “diving solo?”

Vital financial decisions may sometimes require professionals with more experience than yourself. Don’t hesitate, delegate these important financial decisions to people you can trust, like a leading investment management services company.

Effective Efficiency Drawn from Experience and Knowledge

Effective, efficient investment management services are much like a more experienced scuba diving partner. The important objective is to find someone who has a wealth of experience that you can trust. That can foresee potential difficulties, problems, and pitfalls and advise you of them. At the same time, warning you of the perils of going into dangerous areas.

At the same time, they should have enough skilled knowledge to mitigate all these risks and advise you of the difference between a hidden treasure and a useless piece of flotsam, whilst looking out for unexpected discoveries that might generate wealth. After all, regardless of who your partner is, there are always elements of risk and your financial portfolio needs to be protected from them.

Knowing the Difference between Flotsam and Fortune

At Efficient Wealth’s Investment Management Services, we’ve reinvented investing. Cutting through the flotsam, finding the fortunes with calculated calmness.

The fact is, there are so many options to invest in, each with its own risk, return, term, tax, and legal characteristics, such as managed and tax-efficient international investments, unit trust funds, and share portfolios. It’s sometimes to your own peril if you dive into these waters alone.

Allow Efficient Wealth’s Investment Management Services Division to conduct a comprehensive analysis of your existing portfolio. You can trust our experienced professionals to find the treasures.

Taking Care of Short-Term Insurance

Taking Care of Your Assets with Short-Term Insurance

From a broad perspective, if a financial planner is responsible for your future wealth and assets and a financial consultant adjusts and secures your immediate wealth and assets, then short-term insurance would protect the wealth and assets you have already acquired.

But, it’s not just your assets you’re protecting. It also takes care of and protects both you and your loved ones. If the clouds are hanging low, you give your child an umbrella before they go out. If you buy them a scooter, you get them a helmet. Short-term insurance offers the same umbrella, it simply covers more serious incidentals.

How it Works

You invest in short-term insurance with monthly instalments called premiums. How much you invest, would depend on the asset you’re covering and the likelihood of it being damaged. If it is damaged, destroyed, or lost, your cover would be enough to pay for repairs or replace it.

Short-term insurance offers a wide range of coverage. For example, you agree on an amount to be paid out if your vehicle is involved in an accident, or is destroyed or stolen. If these incidentals occur, you are paid the agreed amount. Just be aware that cars depreciate annually, so ensure that you update their value on that basis.

Other Packages You Might Consider

Comprehensive – Short-term insurance that covers the total value of your motor vehicle. Third-party cover is for damage you may have caused to someone else’s car. Balance of third-party (fire and theft) will cover you in the event of your car being stolen, if your car burns, or if you are responsible for damaging someone else’s vehicle or property.

Homeowner’s Short-Term Insurance – This may equal how much reconstruction of your home would cost in the event of structural failure or damage.

Household Contents Cover – This insures the remainder of your belongings that are in your home.

Personal Liability – This assists you if someone sues you personally for damage or injury caused on your property, while all-risk short-term insurance will cover items that are lost outside of your property. Personal accident cover will protect you and your family in the unfortunate event of one of you being disabled or dying in an accident.

Useful Tips

Regardless of whom you select to cover your short-term insurance, be sure to be honest and accurate, and keep the value of your assets up to date and agreed upon with your insurer. The consequences of over-estimated claims may result in your application being rejected. Should you be under-covered, your insurer might only pay out a percentage of the actual value.

Ensure that your premiums are always paid on time to avoid your cover lapsing. Do an annual inventory of your insured items and confirm that you are fairly but adequately covered. You could lower your monthly investment for your short-term insurance cover by increasing your excess payment or improving the security of your assets.

Who to Turn To

Efficient Wealth should be your answer. Efficient wealth has specifically selected short-term insurance specialists that offer a wide range of cover for yourself, your family, and your assets.

Our knowledge, professionalism, and passion for perfection have been protecting wealth and families since 2003 and are only eclipsed by our passion for people, their wealth, and wellbeing. Consult with Efficient Wealth, we’ll keep you efficiently covered.

Discussing Dreaded Disease Cover

Dreaded Disease Cover – The Sensitive Issue

Discussing dreaded disease cover is always a sensitive matter, after all, you’re discussing the potential premature passing of yourself or a loved one. However, ignoring it all together could be financially debilitating or even, in a worst-case scenario, lead to bankruptcy. As a result, it should at the very least, be investigated.

 

The Scary Statistics

It is unfortunately estimated that one in eight people will contract cancer, and one in five will suffer from one of the “Big Four” serious illnesses before the age of 65. The Big Four is commonly referred to as heart attacks, coronary disease or bypass surgery, strokes, and cancer. The latter is the leading cause of claims against dreaded disease cover.

For the most part, dreaded disease cover, also known as critical illness insurance, can protect against other serious ailments. For example, kidney or chronic liver failure, rheumatoid arthritis, respiratory failure, and major organ transplants among a host of others. Be sure to read the fine print of these policies to determine the percentage payouts per diagnosis and which of them are covered.

 

How it Works

Once insured with dreaded disease cover, it provides financial protection if diagnosed with a critical condition. Whether the diagnosis is poor or not, upon accepted diagnosis, the payment will be provided, tax-free, either as a lump sum once-off payment or paid out monthly.

Once in receipt of this money, it can be used for immediate or long-term treatment that is not covered by medical aid. It can also be used as travel expenses for overseas treatments, home renovations to improve quality of life, or as a monthly instalment to maintain living standards in case of lost income.

Dreaded disease cover is, not always, but usually linked to a life assurance policy and oftentimes expires or has reduced benefits once the recipient has reached an agreed-upon age.

 

Will it Reduce My Life Assurance?

There are two basic options for dreaded disease cover. Accelerated or stand-alone benefits. As its name suggests, the stand-alone option doesn’t affect your policy. It does, however, result in being more costly than the alternative. Accelerated benefits are offset against your policy and will affect it proportionately with drawings taken against it.

 

How Much does it Cost?

There are different levels of dreaded disease coverage. It is a costly investment, however, the policyholder may elect to diversify their policy requirements in line with personal health conditions or family history, thereby reducing the number of illnesses to be covered. Thus making it more affordable.

But, there are more comprehensive options that include a complete range of conditions. Some policies would insure conditions not associated with the listed events stated in the policy. Some institutions may offer added benefits, for example, intensive care, early cancer, or relapse cancer treatments.

 

Where to Turn?

Efficient Wealth of course. We understand that the dreaded disease cover is a controversial subject. But, we can offer peace of mind with minimal waste and maximum protection.

Efficient Wealth is a place of trust, where approachable humans deal with real human issues. Dreaded disease cover is an essential element in any future-fit financial plan and, although costly, it could end up saving many investments.

Should you be investigating the benefits of dreaded disease cover, consult with Efficient Wealth. We offer a vast range of options, giving you freedom and flexibility in finding the most relevant risk solution.

A Pure Breed of Professionals

Financial Consultants – A Pure Breed of Professionals

Financial consultants or planners, which is it? When you do a little research on their independent job descriptions, you may find that even the finance industry gets confused. Often referring to one as the other and vice versa. Employment agencies may also confuse the roles of each, seeking a hybrid position including the roles and responsibilities of both professions merged into one metamorphosed position.

Although both positions have similar qualifications and are highly sought after in the field of finance, they have very unique differences and specialise in differing components to your overall wealth, even though sometimes, they may have to consult with each other about an individual need that you might have.

Uniquely the same – Profoundly Different

The planner has an overall understanding of the entire investment landscape. They will assist you in diversifying your wealth, investments, and plans to achieve your long-term goals and objectives. By definition, they would want to see your investments and strategies that were so meticulously planned come to fruition and would prefer to celebrate your successes. This inadvertently creates a medium to a long-term marriage of continuously updating your overall investment portfolio in the forever fluctuating finance marketplace, both into and following your retirement.

Financial consultants would also prefer a relationship with you, however, it is usually a more short-term affair. They will be less likely to examine your overall portfolio, opting rather to take a narrower view when offering guidance. Focussing more on immediate, individual obstacles you may have concerns within the overall portfolio, offering productive, pro-active solutions.

Financial consultants will investigate issues relating to both your personal finance and your various business interests. They will seek immediate solutions to issues relating to key-focus areas. For example, banking, money managing, brokering, various insurance requirements, and may even advise on investment management, stocks and shares, and accounting concerns among a host of other key focus areas.

It’s a Specialised Focus – Select the Specialists

Selecting the correct team of financial consultants is vital. The planning of your increased wealth status may be extremely healthy other than one or two key focus areas, but not all financial consultants are created equal and an ill-advised prediction could have lasting effects on your portfolio.

When selecting the specialists needed to keep your objectives and goals on track, you need a team of financial consultants that have your personal interest and success at heart. You need financial consultants that don’t package deals to suit their own ends, but rather select solid individualised options that are as versatile and flexible as your existing plans.

Select Efficient Wealth. Our team of financial consultants are specifically selected to specialise in identifying immediate problems and offering genuine solutions that best suit your needs. By not only maintaining your planned portfolio but marrying short-term, key-focus points that are designed to align with your existing portfolio, these consider personalised packages that are tailor-made to fit your specific personal or professional requirements.

Efficient Wealth’s financial consultants have a complete bouquet of products on offer. These include but are certainly not exclusive to, healthcare, investment management, life assurance and short-term insurance for your personal benefit, cash management, banking, stockbroking, employee benefits, and business assurance for your business interests.

Our team of dedicated financial consultants are purebred professionals. But, they are human and approachable and are personally invested in your financial wellness. Consult with Efficient Wealth, we work for your efficient wealth and wellbeing.

Successful Wealth Management

The Pathway to Successful Wealth Management

Wealth management is a smart choice for any high-income earner looking to pave their path to lasting financial success. If you’re consistently achieving and exceeding your short- and mid-term objectives and you’re firmly set on succeeding in your long-term financial goals, we at Efficient Wealth would suggest that you consider enlisting wealth management services.

You Have Everything Covered Already

You’ve followed the advice to save sensibly since you were young. You’ve progressed onwards to a financial consultant for initial advice and employed a financial manager to manage your growing, cleverly maintained investments. Most of your impressively maturing wealth is already invested in sensible portfolios.

Wealth management would only seem to be the next logical step. After all, it’s quite simply selecting the profession of financial planning and merging it with the equally impressive function of investment management into one powerful combination of two perfectly complimentary financial services.

Efficient Wealth Brings Calm to the Clutter

We realise that by combining these two aspects, your wealth management environment changes significantly. It now offers a perplexing range of investment options, each with its own conundrums of term, risk, return, tax and legalities which, at times, are extremely difficult to navigate individually.

Having direct access to our specifically selected specialist affiliates and a broad range of third-party investment specialists, Efficient Wealth can proudly offer you a full inventory of investment options that would suit even the most discerning investor.

Catering for both compulsory and discretionary investment funds, we provide for local and international investments across most asset classes and within an extensive range of complex legal structures. Should you consider a consultation with Efficient Wealth, we can demonstrate just how we bring calm to the clutter of the many facets of wealth management.

The Efficiency of Efficient Wealth

Allow us to conduct a comprehensive analysis of your existing financial portfolio. We’ll assess your risk profile and take into account your investment goals, objectives and future needs. We’ll then compile an incisive strategy that is specifically designed to suit your needs.

Your personal wealth management plans will then be actively overseen, in consultation with a specialist certified wealth planner. This process is purpose-built to ensure that tweaks and adjustments can be made in line with your evolving circumstances. With our hands-on approach, this translates into efficient and fast implementation of any decisions you might make, and we’ll also be able to respond quickly and efficiently to any factors that might influence the overall investment environment.

Among our host of professional offerings, Efficient Wealth can include but is certainly not exclusive to, personal share portfolio management, estate and retirement planning, approved unit trusts and multiple investment platforms for discretionary and compulsory funds. Our expertise is not only bound to the South African wealth management marketplace. Also on offer is a comprehensively managed and tax-efficient international investments arena.

If you’re serious about intelligent and proactive wealth management, get in touch with Efficient Wealth, we’ll bring calm and avoid the clutter on your behalf.

Begin Your Retirement Planning

When Should You Begin Your Retirement Planning?

One of the best life practices you can teach your children is to start saving money from early on. Teach them as toddlers using a piggybank, but make sure to begin coaching them as early as possible. You’ll know this now because the truth is, the decades fly by and, before you know it, you’re thirty, or forty or older and you have yet to even begin your retirement planning.

Never fear, it is not too late to start! It merely means that you will have to make up for lost time. To assist and advise both yourself and your children, you will need to learn the myriad of murky financial rivers you will have to travel to get there. Thankfully, Efficient Wealth is here to navigate the uncharted waters and guide you to financial freedom with consistent, sound advice for your retirement planning.

Plan, Plot and Navigate Your Retirement Planning

Know what your retirement planning outcomes need to be. Make notes and plan your financial goals. Plot the course to set the direction of where you ultimately wish to be. Location, housing, transport, medical requirements, your standard of living and lifestyle are all good places to begin your journey.

Navigate with careful retirement planning in mind. Start saving, keep saving and never touch your savings until you have achieved your goals. Invest smartly with knowledge, forethought and foresight for optimum results. If these waters prove to be too rough to sail alone, Efficient Wealth will steer the course for you. We will lead the way in plotting the exact right plan that will lead you to your financial goals.

Ports to Call on Along the Way

Retirement planning is a staged strategy of diligent saving, intelligent investing and careful distribution of your funds among different revenue streams. These ports of call are imperative to visit along your way to ultimately be in a position to sustain yourself once it is time for you to stop earning a salary. Efficient Wealth will show you where to stop, where to take on more provisions and which ones to sail right by.

There are many options to call on. Annuities, unit trusts, share portfolios, and immovable and movable assets are intelligent ways to spread and improve the growth of your money and can yield very good results over both the medium and long term. Some investments can offer quicker returns and reasonable tax advantages if you know where to look.

Lighthouses are There for a Reason

For the most part and with professional oversight, your retirement planning portfolio could meander along very successfully. However, bad weather could be lurking just over the horizon, and, in stormy waters, you will need a strong navigator who can guide you past shallow shores, rocky outcrops and other risky decisions. At Efficient Wealth, we will guide you through it. We’re professionally prepared for all sorts of financial storms.

Let Us Guide Your Retirement Planning

To be successful, you would need to take all of your assets and diversified income sources into account and then value them against expenses, liabilities and life expectancy. It can be difficult. Just keep holding to your course, remain steadfast and invest time in equipping your children with valuable financial knowledge. When the ebbs and flows become too difficult, call on Efficient Wealth. We’re specialists in our trade and will navigate you safely to your financial destination.

Global inflation, gold, and local retail sales

Dr Francois Stofberg
Senior economist and head of sales: Efficient Private Clients

In the United States (US), government data last week showed that the annual increase in the Consumer Price Index (CPI) had slowed slightly in August to 8.3%, but that prices continued to rise month-on-month, increasing by 0.1%. The US and other developed economies have been battling historically high price increases for months, owing to extremely high energy and food bills. This has been caused to a large extent by supply constraints after economies reopened following their coronavirus pandemic lockdowns, and in the wake of Russia’s invasion of Ukraine. It is, however, concerning that core CPI, which excludes volatile energy and food prices, is also rapidly accelerating. In the US, core CPI rose 6.3% when measured against a year ago, higher than the 5.9% seen in June and July.

Wall Street shares plunged following the news, with the Dow Jones Industrial Average losing nearly 1 300 points and the S&P 500 falling 4.3%. The news also dashed hopes of a slowdown in the US Federal Reserve’s (Fed’s) campaign of increasing interest rates to cool down the overheating economy. Until now, the Fed has already instituted two consecutive 0.75% hikes, and there are widespread expectations that it will make a similarly-sized increase at its meeting next week.

Overall, the US economy seems resilient even though economic data has been mixed. Applications for US unemployment insurance fell for a fifth consecutive week, suggesting that the demand for workers remains healthy despite an uncertain economic outlook. Retail sales unexpectedly rose in August, but the prior month’s figure was sharply revised lower. Factory production also rose slightly in August while total industrial production, including mining and utilities, fell.

The price of gold fell to its lowest level since April 2020 amid expectations of more aggressive interest-rate hikes by the US Fed. In total, the price has slid almost 8.8% this year as the Fed aggressively increased interest rates, which diminishes the appeal of assets that bear no interest. A strong US dollar is also usually not good news for commodities like gold that are priced in dollars, because a stronger dollar means that commodities become relatively more expensive everywhere outside of the US. Meanwhile, Chinese growth has slowed so sharply that several major banks did not even think that a 3% expansion is achievable this year. This could further dampen the demand for gold jewellery from the world’s biggest consumer of this precious metal.

In South Africa (SA), retail sales volumes were up 8.6% in July compared with a year ago, when SA was gripped by civil unrest in KwaZulu-Natal and Gauteng. Year-to-date retail sales volumes are 2.9% higher compared with the same period in 2021. This is welcome news because consumer discretionary incomes have come under pressure, owing to rising interest rates and a higher cost of living. Resilience in consumer spending has been underpinned by robust growth in non-labour income, a continued drawdown in respect of savings accumulated during lockdown, as well as an increase in the use of credit.

Three key factors affecting investors right now

Turning efficiency into wealth: Walking the talk