by Robin Hartslief, Investment professional, Marriott

Long-term lessons for investors

Investment is ultimately about income


2018 was an emotional rollercoaster for investors in both local and international markets. The global investment landscape changed considerably, driven by rising US interest rates and the intensifying US-China trade war. Added to this, South Africa faces its own economic growth challenges and sovereign credit rating uncertainty. Not surprisingly, many South African investors are unsure about where to invest. Marriott believes that following the investment principles outlined below will stand you in good stead during these turbulent times and in the years ahead.

Know what you are investing in

When investing, try to understand in which businesses your money is actually being invested. Don’t speculate with your life savings. Speculating invariably involves buying and selling investments based on very little fundamental knowledge and typically produces enormous anxiety and poor results in practice. Rather buy and hold companies that form an integral part of the day-to-day lives of consumers and will continue to grow their dividends regardless of economic conditions.

Invest for income and let the capital take care of itself

Marriott invests only in securities that provide reliable and growing income streams regardless of global slowdowns, exchange rate volatility and varying interest rates. This is because the value of a business is based on the income or earnings it can generate. Only through growing its income can the value of a business increase, a maxim well known by those running their own businesses. Over the long term, this principle holds true for investments.

Don’t pay too much for a reliable income stream

Avoid any investment where the dividend yield is well below the historic average as this typically indicates that the price is too high. Paying to much for an income stream will likely result in poor returns over the longer term.

Remember, above all, investing is ultimately all about income

Capital growth often receives a great deal of investor attention; however, investors should rather focus on building an income stream to fund a lifestyle. It is difficult to predict economic variables such as interest rates, the future direction of the exchange rate, or the stock market. Rather concentrate on what is actually happening to the businesses in which you are invested and monitor the income produced by these investments. This will help reduce financial anxiety in volatile markets and align investors' ultimate goals, which is to have an income in retirement.

Offshore, offshore, offshore

Marriott believes the best value is still to be found offshore. With dividend yields of some of the world's largest companies trading on attractive dividend yields, equity valuations in first-world markets are presenting investors with a good opportunity to generate inflation-beating returns over the next five years. Multinational companies, such as Coca-Cola, Unilever and Johnson & Johnson have consistently produced reliable and growing income which has, in turn, led to capital growth. Although listed on first- world stock exchanges, these businesses transcend geographic boundaries and will benefit from the anticipated emerging market consumption boom in the years ahead. 

Robin Hartslief, investment professional, Marriott

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Issue 72