Investing in stocks
Stocks are but one of many possible ways to invest your hard-earned money. Why choose stocks instead of other options, such as bonds, rare coins, or antique sports cars? Quite simply, the reason that savvy investors invest in stocks is that they provide the highest potential returns. And over the long term, no other type of investment tends to perform better.
Investments in listed equities provides one of the safest environments in which to extract a market bearing return. This environment is well regulated and provides a good environment for getting predictable dividend returns.
As we are bottom up investors, we are open to the JSE excluding property stocks and banks/financial institutions. We exclude property because we have that division and banks because their balance sheets are prone to extreme fluctuations as they hold financial instruments which need specialized valuation models as well as propriety information that they don’t make public
Expect us to invest in companies that have net-cash balance sheets, make consistent profits and declare substantial dividends as a percentage of earnings.
We expect listed equities to return 9-15% compounded over a 10 year period. The upper limit (15%) is consistent with expected returns from equity markets and the lower limit is the upper side of treasury bonds.
These are nominal returns ie before removing inflation.