[Question] What to invest in in 2012.

[kahoel117]

i have some spare cash that i want to invest .

something with a reasonable return (better than the banks) for a short term. 2years +
i already paid of all my debt like credit cards and other debt that i had for 2011.
i currently have some money invested at allan gray, but obviously that is long term.

any advice would be appreciated !

[gac]

Im no expert but have found Unit Trusts to be a really good opportunity. Your money is managed by professionals who know what theyre doing, do it every minute of everyday while you're doing other things. It can be a lot of fun monitoring your money as information is updated daily and available on-line. We have found Allan Gray to be excellent but I'm sure there are many excellent Fund Managers. Go on-line and do a little research.

[gac]

I also meant to add that I understand the beauty of unit trusts to be that there are so many different unit trusts offering a huge variety of risk profiles, enabling one to move across funds as and when one needs/wants to alter a risk profile. Funds also offer different return horizons - i.e. some offer quicker returns than others BUT beware the risks attached with higher returns are often also higher so caution is prudent. I have chosen to stick with large Fund Managers that offers a vast portfolio of funds, as moving funds fom one manager to another often costs more than keeping it in 1 manager portfolio.

I've got to be extremely cautious as I am not a registered investment advisor and so not authorised to provide advice. I am talking purely from my own experiences and am legally prevented from giving advice, so you need to do your own research and take advice from an authorised advisor before investing.

[kahoel117]

@gac
thanks for the advice. currently i'm investing at AG. but that is purely long term. i have read about the rsa retail bonds, which is'nt that bad for the 2, 3 and 5 years.
looking for an high return short term solutions.

[Dave A]

looking for an high return short term solutions.

Generally that implies fairly high risk. What would you consider a "high return"?

[kahoel117]

@dave
anything more than 15% ?

[Dave A]

Well my crystal ball is a bit murky at the moment in terms of what might be hot, but when in doubt look for value - a blue chip listed share with a low PE ratio.

Here's an excercise for you - compare First Rand Bank to African Bank - which share would you pick?

[Miro Bagrov]

A: First Rand.
African Bank has shaky fundamentals. at least that's how I feel about it. However I would not invest in the banking sector in general.

Something at/over 15%:
A: I think that will be property. R100 000 Flat, Rent Income = 2000 * 12 = 24 000. 24 000/100 000 = 24% return
Now if you do not have the cash, and you make the mistake of lending at 9%, you will receive 24-9 = 15%.
Sorry, I ignore tax, because to each their own gross income after all.

[Dave A]

A: First Rand.
African Bank has shaky fundamentals. at least that's how I feel about it.

I agree. The difference in every one of the key ratios is staggering. However, there is a pretty well known fund which is ploughing into African Bank like crazy.
I just think First Rand looks like a bargain by comparison. African Bank is going to have to perform beyond stellar to produce anywhere near the same ROI any time soon.

However I would not invest in the banking sector in general.

I don't know so much. SA banking has been a pretty good sector through all the ups and downs - and no real signs of much that's going to change that any time soon.

[Miro Bagrov]

However, there is a pretty well known fund which is ploughing into African Bank like crazy. .

Shame. Hope no one's pension is there: Of course this will increase their Share price (but that does not make it a good share)
There is a 40% - 50% chance of a recessionary dip over the next year or two. Banks shares will get devalued (well, most shares will).
Secondly, the nett profit margin of a spaza shop is better than that of banks. Worst of all is that banks measure their profit in accounting profit while a spaza shop in cash. A lot of the profits are still to be realised.
Banks have another problem: They keep a large bulk of their Current Assets in Trading Accounts. The value of which is susceptible to international markets. Another problem is that I expect the interest rates to increase within the medium term. Now if this happens, the bank will have larger defaults on their lending and it would have been better to buy a spaza shop than bank shares...

Well - I'll say it
The best investment for 2012 is a spaza shop which sells pies and airtime

[Dave A]

Well - I'll say it
The best investment for 2012 is a spaza shop which sells pies and airtime

Hard to argue against you there

[Blurock]

A cash business is always good to have.

[Justloadit]

Also there is a very strong undercurrent in mobile payment systems which are not bank owned, this will plough deep into current bank income from transactional charges. Keep a look out for this one, as it will reach critical mass overnight.

[Miro Bagrov]

Also there is a very strong undercurrent in mobile payment systems which are not bank owned, this will plough deep into current bank income from transactional charges. Keep a look out for this one, as it will reach critical mass overnight.

I remember we were talking about Airtime.
I actually found the wholesalers of physical Airtime. They give between 8%-6% discount. No need to deposit money, it's cash & run away. I will only move to a digital airtime vendor if they give me 10% discount: Then I'll print the slip myself.
The problem is, that an EFT costs R3-4 to the sender. And a cash deposit costs 1-2% of the deposit value to the Vendor (because vendors use expensive banks) -- With airtime this just means that you can not get good prices from Bank related purchases.

[Justloadit]

Hi Miro,

You will never ever get 10% discount from any of the wholesalers for Cell C, MTN, Vodacom, virgin, yes for Telkom and World Call on some values, as no one gets this discount from the service providers. If any one does give you this type of discount, for the main 3, they are money laundering, and using the high volume turn over of the airtime to mask the activity.

I know what the discounts that are given to wholesalers.

In some instances on very large orders, they may give away 0.5% more than what they get, and this is simply done to reach monthly targets, else they lose their volume discount and SIM card rebates.

This is a very very very competitive market, and you have to diligently watch each sale to make sure that all is correct, one slip up and you are bust. Wholesalers live on 0.5% margins, and go for the turn overs. That is one of the reasons of you having to pay up front before you get your stock, they use your money to purchase from the service providers, in this way they make 0.5% with no investment. It does not sound like much, but when you churn R60 to R100million a month, this becomes serious money.