Try to focus your investing on things you understand and give yourself a time horizon, advises Asanda Notshe from Mazi Asset Management.
RYK VAN NIEKERK: Welcome to this Week’s Be a Better Investor podcast. My name is Ryk van Niekerk, and in this podcast series I speak to leading professional investors about their investment journeys. We try to understand how they analyse investment opportunities, what companies and assets they invest in, and whether they have more hits than misses. The idea is to identify a few golden nuggets of wisdom to help amateur retail investors to become better investors.
So career wise, to be honest with you, access to information just around careers and different opportunities was not readily available. And so to say to you I knew exactly what I wanted to do probably would be a lie. I wasn’t really clear. I think I, fortunately I was not bad at accounting and maths and so on, so my path led me towards actuarial science.
I guess it wasn’t investment per se, but I sort of recognised that the whole idea was to invest in stock and then take that stock and sell it at a profit or slightly higher than what you bought it at, and generate a profit. Then I looked and observed the asset side of things and where I could see, okay, guys are making investments to match their liabilities, and they are making those decisions in a world that that’s ever-evolving with different types of asset classes and opportunities. That was where I think my interest really picked up. That was actually part of the reason why I made the switch from the liabilities to the asset side of things.
I must say I didn’t do too well on that trade – maybe not a glowing sort of a situation there – but that was really the first dipping of my toe that I did. thinking then was, okay, I think this one in the form of Santam probably won’t do as well, it might fall. So if it does I’ll benefit because I’ve taken a short position. And then on the opposite , I think Sanlam will do better.
So to that point, Ryk, I wouldn’t necessarily advocate going into that – the depths of shorting and so on – but rather maybe keep it relatively simple in terms of taking a position on things that you think are going to do well for whatever reason, and where perhaps you have, I’m going to say, a limited amount of money that you can lose.
Conversely – and why it’s something not to get too exuberant with – if the opposite happens, if that share price starts to go up, so R15, R20, R25, R30, you then have an increasing loss because you only have R10 in terms of the share that you sold initially. But now, to give that share back to the person, you need to pay a lot more than the R10 that you initially received when you sold.
RYK VAN NIEKERK: Yes, it’s very, very risky and you need to know what you’re doing when you dabble in CFDs and other derivative products. But subsequent to that first trade did your investment approach change? But yes, it’s the same investment approach in terms of really focusing on and taking the time to understand investments at a fundamental level, and then making an investment decision based on that understanding.
ASANDA NOTSHE: Ryk, I’d take half a step back and always say to people ‘Before you invest, I think it’s very, very important to understand your financial position’. That I think gives you a really, really good starting point in terms of saying I’ve got this amount of time, so the things that I’m going to invest in, I’m going to really give them the opportunity to do the work for me because I’ve got that amount of time.
So yes, you’re perhaps not going into the depth that we might in terms of how we go about investing, but I think you do need to give yourself a chance and educate yourself in a way that is reasonable accessible. A lot of companies at the moment are putting out information, content and so on, so I think that’s a really good starting point.
But would you react, or have you reacted, to a tip in the past, and how would you advise young investors to act when they actually get a hot tip around the braai? So I think there is some caution around those types of things that investors need to be aware of in terms of just the regulations and the way that things work, really why that is there.
And so, having a hot tip might be exciting in one instance, but it might actually be a problem for you in another, in that you’re not actually allowed to have that information. At the end of the day, even as professional investors, we are all human. Yes, we do this on a daily basis but we are also sometimes susceptible to those emotions. So somebody says something out of turn in a conversation you don’t really want to take that with its emotions and act on it; rather corroborate it.
So I came back to the team and I said: ‘Guys, I didn’t understand maybe 60% of what the guy said, but with the 40% that I understand I think it is definitely worth exploring.’
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