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Financial freedom

Financial freedom sets you free

If you want to be financially free as early as possible, it might help you to know what other financially free people have in common.

Worried about dying young

Most of the people I have met who have retired early had an overriding fear that they would retire at 65 and then pass away within a year or two. Most of them had an experience where their fathers or other family members had this bad luck and it created a lasting impression. In many instances this fear was the main driving force for many of their other decisions around money. If you want to achieve financial freedom early, you need to find a source of motivation that will enable you to prioritise this goal so that you can avoid many of the wealth traps that prevent others from getting ahead.

Get and stay married

It is remarkable how many successfully retired people have only been married once. Almost all of them work on their financial goals as a team. Money is rarely a source of conflict in these relationships. This is enormously helpful and you always have a willing “training partner” to keep you motivated to reach your financial goals.

Happy with what they have

Financial freedom is different for everybody, some people will be happy to live on a monthly amount of R30,000 while others cannot get by with anything less than R200,000 per month. You need to find a way to be happy with what you have and not constantly want more. People who earn a lot of money but are never happy with what they have, are NOT going to achieve financial freedom…ever. This is one of the keys to financial success, it is easier to save and build up your investments if you are not constantly paying off your credit card because you HAD to go on that wonderful skiing holiday like your friends did last winter.

Parents showed the way

Successful retirees did not necessarily have wealthy families and nor were they particularly financially sophisticated but very often their parents were prudent with money. They instilled an ethic in their children that saving was important. Many of these successful retirees had to work for pocket money as children. Sometimes it was part-time jobs during holidays or working around the house. Very few of them were simply given everything they wanted. This is a wonderful lesson for parents today.

Money not a source of trouble

Finally, they tend to live a stable and predictable financial life. Almost all of them planned their major expenses carefully and they rarely use debt. Vehicles are purchased with cash. Credit cards are cleared monthly and they have money saved for emergencies. They tend to budget consistently and save every month. When asked about how they dealt with financial shocks, I was surprised to learn that they had less financial emergencies than most other people. On the surface it might seem like they were lucky but I realised that they tend to plan for rainy days. If they had a financial setback they worked really hard to re-establish their emergency funds quickly so that they could deal with any new problems.

Financial freedom takes a lot of sacrifice and hard work – it is possible for anybody.

June 2015 investment markets update

June 2015 investment markets update

The current state of the SA and International markets can best be described as ‘volatile’. May 2015 was bad month for investors, the SA stock market fell by 4% during the month, while a balanced portfolio lost between 2.5% and 3.0%. Almost all asset classes lost money in May however most portfolios will still show positive growth for the year to date. This is very typical of the volatile times we are seeing at present.

Over the past 12 months, the JSE All Share Index delivered a total return of 8.5%. This is significantly lower than the past five year’s annual growth of 17.5%. It is likely that investors can expect 8.5% per year for the next few years rather than 17% because the markets need to normalise again. This is what happens when the markets perform exceptionally well for a sustained period. Investors basically borrow future growth and will need to repay it sooner or later. This is exactly what we are seeing now. The long-term growth of the JSE (since 1900) was about 12.5% ​​per annum. When you have enjoyed a decade of 17.5% growth, it is only logical that you have to experience growth closer to 8.5% somewhere along the line.

If we look at the US index of the 500 largest companies, since 1960 it has only happened in three years that the market did not at some point lose 5% during the year. Deutsche Bank points out that the market on average decreased by more than 10% every 357 trading days (approximately every 18 months). We have already seen more than three and a half years without such a 10% decline. This is the third longest period since 1960 without a 10% decline. Add to this that the US markets are currently about 12% above the long-term average valuations and you can expect more volatility in the months ahead.

What does this mean for investors?

Very little, except perhaps:

  1. Even at a lower growth rate, shares (as a growth asset class) still outperform the other asset classes when it comes to growth above inflation, although investors should temper their expectations and realize that this growth will not be a straight line.
  2. If you want to invest new money, do it over a period of time (phasing it in monthly over 12 months) so any decline gives you the opportunity to buy in order to lower levels. Remember, it is important to start investing than trying to guess when the “time” is right!
  3. If you want money withdrawn from the market, you can go ahead and do not wait for higher valuations – you might get a rude surprise

Investment markets


Investment markets


Four great future variables

If you like to make predictions and believe you can do it better than the rest of the market (that is, the other seven billion people who share this planet with you), then these are the four major variables that will determine the future (according to a recent McKinsey & Co. report):

1. Urbanization in emerging countries

As recently as 2000, 95% of the Fortune 500 companies (the largest 500 companies in the world) were based in developed economies, primarily in North America and Europe. By 2025 (when the Chinese economy could be larger than the US economy), there will be more large companies (with an income of more than a $ 1 billion per year) based in emerging countries than in Europe and the US combined. The world is rapidly urbanising at about 65 million people per year (it comes down to eight new cities the size of London every year). This means that more than half the world’s economic activity will be generated in the 440 largest cities in emerging countries by 2025. It is only about 10 years.

2. Accelerated technological change

It took 50 years for half of the US population to be connected to a telephone. It took radio 38 years to reach 50 million listeners, while China’s mobile text- and voice-messaging service, WeChat, has more than 300 million users and it is only a few years old.  Five years after Apple introduced the iPhone, there were more than 1.2 million apps, which were downloaded 75 million times. Less than 20 years ago only 3% of the population on Earth had access mobile communication. Today there are more SIM cards than people in the world (more than 60% of people have mobile phones and more than 30% of mobile Internet access). Suddenly companies like Uber, Alibaba and Whatsapp are changing the world around us.

3. New old people

More than 60% of the world population currently lives in countries where population growth is under 2.1%. This is the percentage growth that is needed to keep the population constant, taking natural death in to account.  In Germany it is expected that the current working population of 54 million will decrease to 36 million in the next 45 years. The question is how this will affect the capital base and economic activity in Germany and Europe. Add to this that people are older and lead more active lifestyles which leads to a greater life expectancy, then this older, more active population will play a major role in future economic activity.

4. Interconnectivity

Everyone will trade with one another. The time when world trade largely took place between the US and Europe is over. To give one example, China’s trade with Africa has grown from $9 billion in 2000 to $211 billion in 2012. More than one billion people crossed borders in 2009, over five times the number in 1980. This movement of goods and people will mean that contact and trade between people, countries and companies will be much more integrated.

In the South African context we can add the black middle class, which has grown considerably. In 1994 there were about 350,000 black people who were part of the middle class (they made up 10% of the middle class). Currently there is an estimated three million black people in the middle class, this means that more than 40% of the total South African middle class is black. Most of these middle class people live in the larger cities (just under 90%), with the same aspirations as any other citizen. As our population becomes urbanized from the current 64% to an estimated 70% of the population in the coming decades, this demographic phenomenon will shape the economic and political landscape in the next decade or two and not the person in the “Rondalia replica” official residence.

We are often pessimistic about where the world is going and how the world is deteriorating. In the year 1800 there was no country where the life expectancy more than 40 years, today there is no country where the life expectancy below 40 years of age. In South Africa, life expectancy in 1800 about 34 years, today it is closer to 58 years, although still well below the 80 plus mark, in among others, Japan, Australia and Spain. This is partly due to successful immunization programs, better nutrition and antibiotics.

The current drought in California (studies reckon the worst in 1200 years), where large dams are empty, boats are stranded on dry land and mighty rivers are so small that you can jump over them, has people reconsidering the use of water. An interesting article in the New York Times asked the following question:

Which of the following use the most water:

1. A 10-minute shower?

2. A handful of nuts?

3. A batch of laundry in a washing machine?

4. A Hamburger meatball (“patty”)?

The answer is quite unexpected. A 10 minute shower uses 90 liters of water, the handful of nuts about 40 liters, the bundle of laundry almost 130 liters, but a 100-gram hamburger meatball (“patty”) uses almost 1500 liters of water in its production. This is specifically because proteins (in this case the cattle), drink a large amount of water. To take this further, an egg use almost 200 liters of water while a liter of milk “consumes” about 880 liters of water to be produced.

Take these numbers and add them to the urbanization and growing middle class figures mentioned above, then it simply means water will become increasingly important, not to mention the role of the farmer.

Here is a link to the article to which we refer.

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The established personal investment firm, Galileo Capital, is the financial advice company responsible for the investment advice provided by SmartRand. Galileo Capital is a registered financial services provider (FSP), approved and regulated by the Financial Services Board (FSB). (FSB license number 21239.)




B.Comm (Hons)

Investment Management


Theo Vorster

Theo is the chief executive officer of SmartRand and Galileo Capital. He has been in the financial services industry for 25 years.

  • He was the managing director of the largest private client stock broking firm in South Africa.
  • Theo hosts his own television show, Sakegesprek met Theo Vorster, on DStv’s kykNET channel.
  • He is a regular investment commentator on a variety of media platforms.


B.Soc Sc (Economics)

PG. Dip (Financial Planning)


Warren Ingram

Warren is an executive director of Galileo Capital and is responsible for all wealth management and retirement planning services.

  • He has been in the private client financial services industry for 15 years.
  • He was most recently employed by HSBC Bank (Plc) in South Africa, where he was responsible for their wealth management division.
  • Warren is a regular investment commentator on a variety of media platforms.

SmartRand (Pty) Ltd is a joint venture between Galileo Capital (Pty) Ltd and Unplugged Investments (Pty) Ltd. Technology services are supplied by Twisted Toast Digital (Pty) Ltd.


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