The Greek economic tragedy … and why you should care

By Daleen van Wyk, Communication Strategist

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All manner of commentators – investment analysts, academics, economists, politicians and also ordinary people (the citizens of that country) weighed in on the drama of the economic troubles of Greece in recent weeks. After much deliberation and, according to reports difficult discussions, agreement was reached late on Sunday 12 July. This delivered some relief after the uncertainty of recent weeks brought upheaval and volatility to global markets, South Africa included, and in the process wiped billions of value off the leading stock exchanges of the world.

As South Africa celebrates Savings Month there is an important but simple lesson to be learnt from the Greek tale of woe. This may be an over simplification but in short, Greece as a country lived beyond its means, borrowed to cover the shortfall and ended up unable to pay back the debt. Many South African households are in a similar position with household debt at the highest levels in recent years. And the country’s savings rate is the lowest in its peer group – the BRICS (Brazil, Russia, India, China and South Africa) countries.

There have been other incidences – like the financial crisis of 2008 – that should have prompted South Africans about how important it is to budget (and stick to it) and to save for a rainy day and ‘big ticket’ expenses like holidays, children’s education or the biggest one of all, retirement. But the numbers tell a different story.

According to a report by Gauteng Treasury Department the South African savings rate stands at 13.5%, compared to 20% in Russia, above 30% in India and 50% in China. Of particular concern, as reported in Finweek last year, is the fact that only 44% of salaried individuals have long term savings or retirement products. Estimated national household bank debt as a percentage of disposable income stands at 78% according to Transunion’s quarterly report published in January this year. SA Savings Institute Chairperson Prem Govender noted at a Savings Week event hosted earlier this month that Greece’s debt stands as 177% of GDP; a shocking statistic. She added that South Africa’s debt as percentage of GDP is also concerning at 66%. Thankfully not (yet) on the scale of the popular Mediterranean holiday destination.

As this unfolding economic story of Greece dominates global headlines and the local investment community and the SA Savings Institute distribute more than the usual volume of information about saving in support of Savings Month, it is the perfect reminder to review your finances, savings levels and investment strategies.

Do not think it is only top earning individuals that can accumulate wealth or save. It is within the reach of everyone but requires discipline … and a plan. A blue collar worker from Vermont in the USA who worked at a filling station for 25 years and later as a janitor, earlier this year bequeathed a $8m (more than R90m) fortune to charity when he died at 92 in February. According to a report published by the Daily Mail he lived a frugal life and bought quality shares for years, which accumulated to that incredible amount.

To guide you we share with you the 16 investment rules of one of the leading and most admired investors of the past 100 years – Sir John Templeton, co-founder of the much venerated and successful global investment powerhouse, Franklin Templeton. It was the anniversary of his death eight years ago earlier this month but his philosophy remains as relevant as ever.

  1. Invest for maximum total real return.
  2. Invest, do not trade or speculate.
  3. Remain flexible and open-minded about types of investment.
  4. Buy low.
  5. When buying shares (in companies) search for bargains among quality shares.
  6. Buy value, not market trends or the economic outlook.
  7. Do your homework or hire experts to help you.
  8. Aggressively monitor your investments.
  9. Do not panic.
  10. Learn from your mistakes.
  11. Begin with a prayer.
  12. Outperforming the market is a difficult task.
  13. An investor who has all the answers does not even understand all the questions.
  14. There is no free lunch.
  15. Do not be fearful or negative too often.

For more about Sir Templeton’s rules visit the Investment planning page on the Brenthurst Wealth Management website. You can view it here: http://www.bwm.co.za/index.php/services/investment-planning/.

Sources:

www.finweek.com/2014/11/20/money-south-africans-saving/

www.fin24.com/Savings/News

www.franklintempleton.com

http://www.dailymail.co.uk

http://www.treasury.gpg.gov.za/Documents/South%20African%20position%20in%20BRICS.pdf

http://www.transunion.co.za

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