12:15– 13:00
7June2016
Topic: HowtoinvestlikeBuffettandEinstein
Chair: EnosNgutshane
Speaker:StevenNathan
CREATING EXTRAORDINARY VALUE
FOR OUR MEMBERS
Invest like Buffett, Einstein & Musk
Steven Nathan, CEO
June 2016
Complex problems solved using first principles
Wouldyoutakeinvestmentadvice
fromWarrenBuffett?
10
1. Warrenwho?
6%
2. Onlyifourassetconsultanttellsusto
8%
3. Yes
84%
4. No
2%
Own low-cost equity funds, ignore the experts
DoesWarrenBuffettrecommendthat
investors
10
1. Listentotheindustry’ssalespeople
4,4%
2. Investinhedgefunds
8,8%
3. Payhigheractivemanagementfeestoearnahigherreturn
4,4%
4. Investinalowcostindexfundandsittightforthelonghaul
82,4%
Why invest in an underperforming system?
S&P: Dec 2015 % Equity funds underperforming market
88%
83%
81%
83%
75%
66%
63%
51%
1 year
3 year
5 year
SA
Source: SPIVA Survey, December 2015, Standard & Poors
US
10 year
Compounding is the eighth wonder
Invest like Buffett, Einstein & Musk
First principles: How to maximise our members’ money:
1.
Savings & term
2.
3.
Maximise long-term return
Minimise fees
Fundamental truths
•
Equities the only proven way to create long-term wealth
•
Active management, switching & high fees destroy wealth
Compounding: Long-term impact is astounding
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Wealth is created owning great companied over a long period
Value after-inflation of R1 invested 1956 - 2015
Source: 10X, Morningstar
R 135
Shares
Bonds
Cash
Work for 40 years: 1956 to 1995.
Retired in living annuity 20 years to 2015
R 2.7
R 2.9
Wealth is created owning great companied over a long period
Value after-inflation of R1 invested 1956 - 2015
R 135
Shares
Bonds
Cash
2008 Global
Financial
Crises
Work for 40 years: 1956 to 1995.
Retired in living annuity 20 years to 2015
1987 Crash
1997 Asian &
Russian crises
Nasdaq
crash
9/11
R 2.7
R 2.9
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
1969
Crash
1970’s Oil crises
Soweto Riots
Source: 10X, Morningstar
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Wealth is created owning great companied over a long period
Value after-inflation of R1 invested 1956 - 2015
Shares
Source: 10X, Morningstar
R 135
Bonds
Cash
Shares less 2% fees
R 43
R 2.9
R 2.7
R1investedintheSouthAfricanstockmarketin
1956wouldbeworthR136in2015,adjustedfor
inflation.HowmuchwouldR1beworth,netofa
2%pafee?
10
1. R109
12,9%
2. R77
12,9%
3. R43
67,7%
4. R3
6,5%
Which system will produce more wealth for members?
Wealth created
Wealth destroyed
Traditional system is complex, expensive & opaque
1300 Funds
Performance
fees
EB admin
platform
Financial
advisors
Investment
managers
Investment Investment
administrator
advisors
Index fund is simple, low cost & transparent
One strategy,
integrated system
Which system would Elon use?
Approximatelyhowmanyunittrustfundare
registeredinSouthAfrica?
10
1. 1300
73,2%
2. 1000
8,5%
3. 350
11,3%
4. 120
7,0%
Long-term returns
Return after inflation % pa
Buffet, Einstein & Musk
Retirement industry
6.5%
6.5%
Active manager under-performance
0%
-0.5%
Portfolio switches
0%
-0.5%
-0.5%
-1.5%
6%
4%
High Equity Portfolio return
Fees
Net return pa.
Member
Salary pm
R10 000
Contribution
15% or R1 500 pm
Salary inflation
1% pa
Target replacement ratio
Net return pa.
70% final Salary, equals R2m capital in todays
money
6%
Long-term returns: 2% makes all the difference
Value in today's money after 40 years for a contribution of R1,500 pm
growing at 1.0% pa above inflation
R 3 184 000
Compound
impact of 2%
R 1951 007
6%
R 1 798 000
4%
Return after inflation pa
Win-win for all. Except service providers
Muddy waters:
•
Complex investments
•
Red herrings, opinions
•
Opaque
•
Trustees & members disempowered
Clear & pure:
•
Single strategy for all
•
Substance & facts
•
Transparent
•
Empower trustees & members
Smart practices that best serve members
interests
Maximise pension: Max l-term returns, minimise fees
Low cost, equity index funds. Ignore “experts”
Benefit from compounding long-term returns
Use the system that will create wealth for members
Members win with clear, simple & proven strategy
Industry will lose, from much lower fees
POs & trustees can’t rely on industry to do this
A simple smart practice: One page investment
summary
Thank you
Disclaimer
Disclosures in terms of Financial Advisory & Intermediary Services Act (FAIS)
10X Investments is a Licensed Financial Services Provider (#28250), authorised to provide investment products including retirement
annuities, preservation funds and pension funds.
10X does not provide advice as defined by the Financial Advisory and Intermediary Services Act (FAIS). 10X does not conduct a financial
needs analysis and does not consider alternative products or product providers.
Steven Nathan is registered as a Key Individual for 10X with the FSB. Steven has over 15 years experience in financial services, was
previously a managing director at Deutsche Bank in SA and London and holds the following qualifications: Bcom, CA (SA), CFA.
As an authorised Financial Services Provider, 10X may not request or induce in any manner a client to waive any right or benefit conferred on
the client by or in terms of any provision of the General Code of Conduct, or recognise, accept or act on any such waiver by a client.
Investment risk is associated with investing in the 10X Retirement Funds. The investment return is not guaranteed, it depends on the returns
generated by the underlying investments in the financial markets. These returns change on a daily basis and may be positive or negative.
10X Investment’s compliance department is outsourced to Independent Compliance Services (Pty) Ltd, an independent company that is
regulated by the Financial Services Board. The compliance officer is Enrique Goosen who can be contacted at 021 975 6597.
10X Investments holds professional indemnity insurance.
The 10X Top 60 SA Share Index and 10X SA Property Index (the “Indices”) is the property of 10X Investments (Pty) Ltd, which has
contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the Index. The Indices are not
sponsored by S&P Dow Jones Indices or its affiliates or its third party licensors (collectively, “S&P Dow Jones Indices”). S&P Dow Jones
Indices will not be liable for any errors or omissions in calculating the Index. “Calculated by S&P Dow Jones Indices” and the related stylized
mark(s) are service marks of S&P Dow Jones Indices and have been licensed for use by 10X Investments (Pty) Ltd. S&P® is a registered
trademark of Standard & Poor's Financial Services LLC (“SPFS"), and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings
LLC (“Dow Jones”).
Cape Town
Johannesburg
10X Investments (Pty) Ltd
Suite 105, Foyer A, Sovereign Quay,
34 Somerset Road,
Green Point, 8005
Tel: 021 412 1010
www.10X.co.za
10X Investments (Pty) Ltd
Block D, Upper Grayston Office Park
152 Ann Crescent, Sandton
Johannesburg, 2031
Tel: 011 685 1300
22
Invest like Buffett, Einstein & Musk
Complex problems solved using first principles
Own low cost, equity index funds for long-term.
Ignore “experts”
Compounding is the eighth wonder