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Shaun van den Berg Head of Client Education at PSG Online Welcome to Marketworx: Centurion Tuesday, 24 July 2012.

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Presentation on theme: "Shaun van den Berg Head of Client Education at PSG Online Welcome to Marketworx: Centurion Tuesday, 24 July 2012."— Presentation transcript:

1 Shaun van den Berg Head of Client Education at PSG Online Welcome to Marketworx: Centurion Tuesday, 24 July 2012

2 MakeMoney Investor Trader FundamentalAnalysis ResearchTools Value Investor GrowthInvestor Investing for Dividends TechnicalAnalysis WEN Charting Break-outTrading Unit Trusts ETF Equities EquitiesCFD Marketworx Agenda SSF

3 To create a second income To replace income To provide for children’s education To achieve Financial Freedom … Roadmap…to Wealth Creation Financial Objectives

4 Financial Freedom 90% Income from Active Income 90% Passive Income from Investments 10% Income from Investments (Passive) 10% Income from Active Income

5 Knowledge & Experience Risk Profile TimeMoney Financial Objectives Novice ? Novice ? Advanced? Advanced? Intermediate? Intermediate? Roadmap …to Wealth Creation Investor?Trader? Both?

6 Investor or Trader (or Both?) Investor Passive Management View > 3-years –Buy & Hold –Quality, Undervalued Shares –Balanced Portfolio Capital Growth Dividend Income & Growth Low Brokerage Costs Capital Gains Tax (CGT) –R exempt –33.3% inclusion rate –13.32% R Capital Gain R Capital Gain Less R Exemption = R Taxable Gain = R Taxable Gain Inclusion rate 40% x 33.3% = 13.32% = 13.32% = R Tax Payable = R Tax Payable

7 Active Management View < 3-years –Position Trading –Swing Trading –Jobbing (Speculating) Capital Growth –Buy Low & Sell High –Sell High & Buy Low Higher Brokerage Costs Income Tax –40% Investor or Trader (or Both?) TraderInvestor Passive Management View > 3-years –Buy & Hold –Quality, Undervalued Shares –Balanced Portfolio Capital Growth Dividend Income & Growth Low Brokerage Costs Capital Gains Tax (CGT) –33.3% inclusion rate –R exempt –13.32%

8 Investor Matrix Prudent Speculative Aggressive Conservative REWARDREWARD High LowHigh Low RISK

9 “If you have the wrong reasons why you want to get started, you will have the wrong reasons for wanting to stop (quit).” – John Maxwell Extra-Ordinary Person: –Extra Change –Extra Thinking –Extra Effort –Extra Time –Extra Planning –Extra Help Why do you want to get involved in the share market?

10 PSG Online website

11 Online Trading Course Select Tutorials

12 Marketworx Tutorials


14 Marketworx Preparation Activity #2: Apply the Fundamental Analysis checks to the shares in your initial watch list. Activity #4: Apply the portfolio management checklist to your “prospect” watch list (i.e. after reducing the “initial” watch list) Remember risk management. Activity #3: Compile graphs using the technical analysis indicators you have learned about to the shares in your Watchlist. Activity #5: Start trading. Build a share portfolio. Select the best opportunities based on your fundamental and technical criteria. Activity #1: Ensure that you have compiled your Watch lists in your PSG Online trading account before moving onto step 2!

15 Marketworx Program Before Marketworx Register on PSG Online/ Create a Watch List /Share / Portfolio Management / Start Trading During Marketworx Financial Goals / Trader, Investor or both? Investment Strategy / Trading Strategy Post Marketworx Review Marketworx presentation / More questions Fundamental & Technical Tasks / Simulator Trading After Six Months Open a Trading (EQT) Account / ETF & Unit Trust Accounts / SSF / CFD Accounts / Offshore Account

16 How to choose your first shares –Step # 1: Narrow down the choice –Step # 2: Gather fundamental information –Step # 3: Gather technical information –Step # 4: Create a Balanced Portfolio –Step #5: Start Trading Getting Started: Five Steps

17 Step #1: Narrow down the Choice –Top 100 Simulator List –Prospecting: Top-Down Approach –Prospecting: Financial Journalism –Initial Watch Lists (3 x 30) Getting Started: Step 1

18 Narrow Down the Choice Select Indices

19 Top 100 Shares Select Futures Select Simulator List PrintShareList

20 Step #1: Narrow down the Choice –Prospecting: Top-Down Approach –Prospecting: Financial Journalism Getting Started: Step 1 (a)

21 International Markets Economic Indicators Currencies Precious Metals Local Markets Specific Sectors Specific Shares Checklists Top - Down Approach

22 International Markets Bullish Bearish (Just!)

23 International Markets Bearish (Just!) Bearish Bullish (Just!)

24 Oil & Copper Bearish

25 Precious Metals Bearish

26 Currencies (US $) USD strength / EUR weakness JPY strength/ USD weakness USD strength / GBP weakness

27 Currencies (ZAR) ZAR weakness / USD strength ZAR strength / EUR weakness / ZAR weakness / GBP strength

28 JSE All Share Index Bullish Resistance Support Resistance

29 Local Market (Sectors) Bullish (Just) Bullish Bearish

30 Local Market (Industry) Bearish Bullish Bearish Bullish

31 Financial Journalism Read! Read! Read! –Bloomberg / Reuters/ CNN Money –PSG Online / MoneyWeb / Fin24 –Business Day / Business Report/ Sake –Financial Mail / FinWeek Beware Analysis Paralysis Scan Headlines – Shares you know Look for Bad News

32 Getting Started: Step 1 (b) Step #1 a: Narrow down the Choice –Prospecting: Top-Down Approach –Prospecting: Financial Journalism –Step # 1 b: Create Initial Watch Lists (3 x 30) –Mining Shares –Financial Shares –Industrial Shares

33 Creating a Watch List

34 Universe of Shares ± 400 Shares Watch Lists 3 x 30 Shares Core Portfolio Shares Step 1: Prospecting Process Step 2: Analysis Process Getting Started: Step 1 (b)

35 Creating a Watch List Step 1: Click Watch List Step 3: Click Add button Step 5: Click Add button Step 6: Select Dustbin to remove Step 4: Enter Share Code Step 2: Enter Watch List Name

36 Initial Wish List View Share Movement

37 Initial Wish List – Ranking Move Select Column to Rank

38 Step #1: Narrow down the Choice –Prospecting: Top-Down Approach –Prospecting: Financial Journalism Step #2: Gather Fundamental Information –Share Info Page –Company Analysis Getting Started: Step 2

39 Initial Wish List(s) Select Watch List Select Share Code

40 Share Info Page

41 Research Tools: Share Info Select Company Analysis

42 Research: Company Analysis

43 Step #1: Narrow down the Choice –Prospecting: Top-Down Approach –Prospecting: Financial Journalism –Initial Watch Lists (3 x 30) Step #2: Gather Fundamental Information –Share Info: Company Analysis Step #3: Gather Technical Information –Technical Chart / Interactive Chart Getting Started: Step 3

44 Research Tools: Share Info Select Interactive Chart SelectTechnicalChart

45 Research Tools: Technical Chart

46 Research Tools: Interactive Chart

47 Step #1: Narrow down the Choice Step #2: Gather Fundamental Information Step #3: Gather Technical Information Step #4: Create a Balanced Portfolio –Structure –Spread –Stop Loss? Getting Started: Step 4

48 Build a Balanced Portfolio Large Cap (RES) (IND) (IND) (FIN) 50% Mid Cap (MIN) (IND) (IND) (FIN) 40% 10% Cash Mid Cap (MIN) (IND) (FIN) (IND)

49 1000c Stop loss 10 % of 1000c = 100c Value 1500c stop loss = 2000c stop loss = 1800c Stop Loss Level Stop Loss Strategy (Equities)

50 Step #1: Narrow down the Choice Step #2: Gather Fundamental Information Step #3: Gather Technical Information Step #4: Create a Balanced Portfolio Step #5: Start Trading Getting Started: Step 5

51 Select Simulator Account SelectSIM Reset Account Check R

52 Select New Order Enter Share Code & Click GO Select New Order Select Buy & Enter Quantity Enter Price Click Submit EnterQuantity

53 Select Order Book

54 Select Portfolio Holdings Select Portfolio Brokerage Costs

55 Set up a Price Watch Enter Share Code & Click GO Select Price Watch Select Trailing % Click Submit EnterPercentage

56 Set up a Price Watch Select Price Watch

57 Macro Fundamentals (Economic Analysis)

58 Share Market Analysis Share Market Analysis FundamentalAnalysis TechnicalAnalysis MacroFundamentalsMicroFundamentalsVolume Price

59 General Economic Influences –Gross Domestic Product (GDP) –Fiscal & Monetary Policy –Inflation Rate –Interest Rates –The Exchange Rate The Investment Cycle Economic Analysis

60 Gross Domestic Product (GDP) Average 4% Expansion Contraction

61 Fiscal Policies Tax Cuts Additional Taxes DiscourageSpendingEncourageSpending

62 Government spending Government spending Increases or decreases in government spending Influences the business environment Government spending has a strong “Multiplier Effect” Companies that rely on government spending Defence, Social grants, Education or Infrastructure Influence the General Economy Budget Priorities

63 Government spending - Multiplier Effect Government spending - Multiplier Effect Road Building Earthmoving Equipment Suppliers Construction Workers Concrete Materials Consumer Goods

64 “Multiplier Effect” Road Building Earthmoving Equipment Suppliers Construction Workers Concrete Materials Consumer Goods Eqstra Barworld Bell Wearne PPC M&R Holdings WBHO Aveng Afrimat Retailers

65 Monetary Policy Restrictive Monetary Policy Reduces expansion of Businesses More expensive to finance home loans Increases borrowing costs Reduces Growth Rate of Money Supply Reduces supply of funds for working capital Reduces demand for Durable goods Affects all segments of economy & Relationship with other economies

66 Inflation Government, industry & consumer over spending. Printing too much money to finance this luxury. By-product of too low interest rates promoting too much growth too quickly.

67 Inflation (Continued) Inflation causes differences between real & nominal interest rates Inhibits growth & innovation Influence the trade balance & exchange rate Beyond domestic economy - differential inflation & interest rates Changes in spending & savings behaviour Unexpected changes in Inflation – difficult to plan

68 Interest rates rise Negative for profits Money is diverted to interest- bearing securities Market anticipates this & peaks before interest rates Lower share prices & lower company valuations Consumers spend less - Lower profits Demand for money increases increases Interest Rate Cycles

69 Rand Strengthens –R7.50 / US$ The Exchange Rate (Importer) Rand Weakens R8.50 / US$ Imports are cheaperImports are cheaper $ R7.50 = R $ R7.50 = R Buy more importsBuy more imports Imports are more expensiveImports are more expensive $ R8.50 = R $ R8.50 = R Buy fewer importsBuy fewer imports

70 Rand Strengthens R7.50 / US$ The Exchange Rate (Exporter) Rand Weakens R8.50 / US$ Exports become expensive overseasExports become expensive overseas $1.00 / R7.50 = R0.1333$1.00 / R7.50 = R R10 Box of grapes = $1.33 per boxR10 Box of grapes = $1.33 per box Sell less goods – Not competitively pricedSell less goods – Not competitively priced Exports become cheaper overseasExports become cheaper overseas $1.00 / R8.50 = R0.1176$1.00 / R8.50 = R R10 Box of grapes = $1.18 per boxR10 Box of grapes = $1.18 per box Sell more goods – Competitively pricedSell more goods – Competitively priced

71 Competitive? ZAR vs USD & EUR Competitive? Rand Strength Rand Weakness Rand Strength

72 Inflation (Relative to Reserve Bank Target?) Interest Rates (Going up or down?) GDP (Above 4% or below?) Exchange Rate (Weakening or strengthening?) Foreign Interest Rates (Going up or down?) The Economy & Investment Cycle

73 Stock MarketAbove Average Performance Under Average Performance Interest Rates DecliningIncreasing InflationDecliningIncreasing EconomyBelow AverageAbove Average Exchange Rates StrengtheningWeakening Foreign Interest Rates DecliningIncreasing The Economy & Investment Cycle

74 Phase I Phase II Phase III Phase IV Economic Growth Below Average Above Average Below Average Interest Rates DecreasingIncreasingIncreasingDecreasing Stock Market AboveAverageBelowAverageBelowAverageAboveAverage The Investment Cycle

75 Key Annual Forecast Source:

76 Sector Rotation: Relative to Economy Building & Engineering Financial ServicesIndustrials Information Technology Packaging & Printing Gen Retail Services Transport Banks Financials Life Assurance Media Paper Short-term Insurance Telecomms ALSI 40 Chemicals Diamonds Diversified Industrials Electronics Mining Houses Platinum Resources Beverages Education Gold Mid Caps Private Equity Small Caps Steel Alt X Furniture Healthcare Hotels & Leisure Metals & Minerals Mining Exploration Property Under weight Over weight Under weight Over weight to Neutral Under weight to Neutral

77 Income Statement Balance Sheet Cash Flow Statement Financial Statements

78 Company Analysis After determining an industry’s outlook is good: Analyse & compare individual company performance within entire industry Use financial ratios & cash flow values to identify best company in a promising industry Examine past performance & future prospects Understand the company & outlook Determine “Intrinsic Value” & compare to price

79 Rm Rm Sales (Turnover or Revenue) XXX Less: Expenses (XXX) Operating Profit (EBITDA) XXX Less: Finance Costs (XXX) Profit before Taxation (EBT) XXX Less: Taxation on Profits (XXX) Profits after Taxation XXX Less: Preference Dividend (XXX) Earnings (or Net Profit) XXX Less: Ordinary Dividend (XXX) Retained Earnings RXXX Income Statement of Company XYZ for the Year Ended 31 December 2011 Financial Statements Rm RmXXX(XXX)XXX(XXX)XXX(XXX)XXX(XXX)XXX(XXX)RXXX

80 Earnings Number of shares in Issue Earnings Number of shares in Issue Profit Profit = Earnings Dividends Retained Earnings = Earnings Per Share (E.P.S.) E.PS. = R E.P.S. = 8c Earnings Ratios

81 Earnings Per Share (E.P.S.) x 100% Current Share Price Earnings Ratios = Earnings Yield (%) (E.Y.) E.Y. = 8 cents per share x 100% 100 cents per share E.Y. = 8 cents per share x 100% 100 cents per share E.Y. = 8% Current Share Price Earnings Per Share (E.P.S.) = Price / Earnings Ratio (P/E) P/E = 100 cents per share 8 cents per share P/E = 12.5 times You want a high earnings yield You want a low P/E multiple

82 Earnings Ratios Dividends Per Share (D.P.S.) x 100% Current Share Price = Dividend Yield (%) (D.Y.) D.Y. = 3 cents per share x 100% 100 cents per share D.Y. = 3% You want a high dividend yield

83 Investor Earnings Ratios

84 Rm Rm Assets 200 Less: Liabilities (50) Total (Net) Assets 150 Rm Rm Shareholder’s Funds 150 (Capital Employed) Balance Sheet as at 31 December 2011 How funds are spent Where funds come from Financial Statements Rm175(75)100 Rm100

85 Cash Flow from Operating Activities Operating Profit before tax & interest DepreciationAmortisationProvisions Interest Paid Taxation Paid Changes in working capital (Debtors, Creditors, Inventory, etc.) Net Cash provided by operating activities Rm Rm (3) (2) (3) (2) (20) (15) (15) (12) Cash Flow Statement Financial Statements Are they turning cash into profits?

86 Turnover Growth Operating Profit Growth Operating Margin Interest Cover Earnings before Tax (EBIT) Growth Effective Tax Rate Profit Attributable to Ordinary Shareholders Growth Dividend Cover Retention Rate Earnings per Share (EPS) Growth Ratio Analysis Headline EPS Growth Net Asset Value (NAV) growth Return on Equity (ROE) Return on Tangible Assets Return on Capital (ROC) Debt/ Equity (Gearing) Share Price (Cents per share) Price/ Earnings (P/E) Dividend Yield (DY) Price/ Net Asset Value (P/NAV) Cash Flow / EPS

87 Fundamental Analysis Checklist Undervalued Risk Management Profitable P/E < 12.3 PEG < 75% PRICE/NAV < 2 ROE % > 15% Interest Cover > 3 times

88 Valuation: PEG Ratio

89 "Any company on a very high PE ratio is living on borrowed time as far as its market rating is concerned. Sooner or later the growth rate will slacken and the PE ratio will fall to a more normal level and then to the average or even below it.” John Slater

90 Although both shares are trading at a P/E of 15 our forecast growth rate is 30% for stock 1 versus 10% for stock 2. PEG Valuation. This means Stock 1 trades at a PEG of 50% (15/30),which is considered very cheap; Stock 2 at 150% (15/10) is expensive. On average the sector is on a PEG of 75% (15/20), and, therefore, indicating value.

91 PEG = P/E Ratio / Forecast average growth over next 5 years Select companies with not only low P/E ratios as such, but those companies with P/E ratios low relatively to their EPS growth Trying to target the better companies trading on low P/E’s Earnings growth rate must be higher than the P/E ratio at time of investingValuations

92 Net Asset Value (NAV) Valuation:

93 Net Asset Value (NAV) is the Ordinary Shareholders' Funds divided by total number of shares issued. In theory if the company sells all of its assets at recorded prices & pays off all debt, the net amount will then be available for distribution to shareholders..Share prices should rarely trade below this value. Net Asset Value (NAV) NAV = Ordinary Shareholder’s Funds Total number of shares issued NAV = R = 32.4 cps

94 Price/Net Asset Value (P/NAV) together with return on equity (ROE) is one of the most powerful valuation tools, but is seldom used correctly. The calculation is simply the current share price divided by the NAV. Price / Net Asset Value (P/NAV) P/NAV = Current share price Net Asset Value (NAV) NAV = 100 cps 32.4 cps P/NAV = 3.1 times P/NAV = Current share price Net Asset Value (NAV) P/NAV = 100 cps 32.4 cps P/NAV = 3.1 times

95 Profitability Ratios (ROE) ROE = Profits attributable to ordinary shareholders Ordinary shareholder’s funds ROE = R x 100% ROE = 23.91% ROE = EPS Opening Net Asset Value (NAV) ROE = 7.4 cents x 100% 28.8 cents ROE = 7.4 cents x 100% 28.8 cents ROE = 25.69%

96 Debt / Equity Ratios Debt / Equity = (LT + ST interest bearing debt) - (Cash + Bank) Total Shareholder’s funds Debt / Equity = (R R ) - R R Debt / Equity = R R R Debt / Equity = R R Debt / Equity = 50

97 Interest Cover Interest Cover = Earnings before interest & tax (EBIT) Net interest paid = R R = 5.75 times One of the most important ratios to consider financial risk One of the most important ratios to consider financial risk A three times cover means sufficient profits to pay the current interest charge three times - manageable This is normally the minimum cover required - below this level, we would rarely contemplate an investment!

98 Cash Flow from Operating Activities Operating Profit before tax & interest DepreciationAmortisationProvisions Interest Paid Taxation Paid Changes in working capital (Debtors, Creditors, Inventory, etc.) Net Cash provided by operating activities RM RM (3) (2) (3) (2) (20) (15) (15) (12) Cash Flow Statement To compare this figure with EPS, subtract capital expenditure to maintain operations. Not always readily available – so subtract depreciation. Financial Statements

99 Cash Flow from Operating Activities Net Cash provided by operating activities Depreciation Adjusted cash provided by operating activities Cash Flow per Share EPS Cash Flow / EPS RM RM (14) (13) (14) (13) Cash Flow Statement Any ratio above 0.75 can be considered very good. Any ratio consistently below 0.50 should be questioned. If a company cannot convert its profits into cash then something is wrong! Financial Statements

100 Company Analysis

101 Research: Company Analysis

102 Company Analysis Undervalued Undervalued Undervalued ManageableFinancialRisk Profitable

103 Big Picture –Economy (GDP growth) –Inflation & Interest Rates Company Analysis: –EPS Growth & Turnover Growth > 10% –Valuation: Price/NAV 35 and < 75 (Undervalued) –Profitable: ROE > 15% –Manageable Financial Risk Interest Cover > 3 times –Cash Flow Cash /EPS > 0.75 Summary: Fundamental Benchmarks

104 Investment Strategies

105 Watch Lists

106 View Watch List as “Investor”

107 “Rank” Watch List as Investor

108 Strategy: Value Investing

109 “Price is what you pay, value is what you get” Warren Buffet

110 Research Tools: Value Filter SelectDefault

111 Debt- free? Interest cover Generating cash? Spending money efficiently? Cash Flow / EPS Turnover & earnings growth beating inflation? Gross profit, Operating profit & Net profit margins growing? Company well-positioned to beat competitors? Generating value for shareholders? Quality (Safety)

112 Research Tools: Quality View Select Share Code

113 If you had invested $ at inception into Berkshire Hathaway in 1965 … your nest egg would be worth more than $50-million. Warren Buffet is a patient & cautious investor. He ignored the tech-bubble entirely & still does not hold a single technology or internet stock. He likes shares he can “see” & “understand” “It is much easier to predict the relative strength that Coke will have in the soft drink world than Microsoft will in the software world” Buffet likes to know the companies intimately. Holds onto them for the long term, or as long as they pass his growth tests without becoming over-priced. Advice: The key to success is to think of yourself as part-owner of the business. Successful Investor: Successful Investor: Warren Buffet

114 Value investing is the strategy of selecting shares that trade for less than their intrinsic values. Value investors actively seek shares of companies that they believe the market has undervalued. They believe the market overreacts to good & bad news, resulting in share price movements that do not correspond with the company's long-term fundamentals. The result is an opportunity for value investors to profit by buying when the price is deflated. Typically, value investors select shares with lower- than-average price-to-NAV or price-to-earnings (PE) ratios and/or high dividend yields. Value Investing

115 The big problem for value investing is estimating intrinsic value. –There is no "correct" intrinsic value. –Two investors can be given the exact same information & place a different value on a company. –For this reason, another central concept to value investing is that of "margin of safety". This just means that you buy at a big enough discount to allow some room for error in your estimation of value. The very definition of value investing is subjective. –Some value investors only look at present assets/earnings & do not place any value on future growth. –Other value investors base strategies completely around the estimation of future growth & cash flows. Despite the different methodologies, it all comes back to trying to buy something for less than it is worth. Problems: Value Investing

116 Compared to charting, value investors have tons of financial documents to read. It is very labour-intensive. The value investor is often subject to management buy outs, or "going private" phenomenon. You have to wait for market forces to realise that the company is undervalued to move it up. You need loads of patience. Problems: Value Investing

117 Growth at a Reasonable Price (G.A.R.P.) Peter Lynch

118 He was in charge of Fidelity’s Magellan Fund between 1977 – –Posted an average annual return of 29%. –No fund manager has ever run a fund of its size ($14-billion) so successfully for such a long time. Attributes success to the skill of finding investment opportunities in areas you are already familiar with. Looked closely at stocks for which he & his family had “positive personal experiences as consumers” Looked for the simplest of businesses to invest in … Successful Investor: Peter Lynch

119 “Go for a business that any idiot can run, because, sooner or later, any idiot probably is going to run it.” Peter Lynch Successful Investor: Peter Lynch

120 His book was published in 1989 has the same relevance today. –Introduced the Holy Grail of investing … the “Ten Bagger” –Make 10-times your money within 5-years Successful Investor: Peter Lynch

121 Peter Lynch, pioneered a hybrid of growth & value investing with what is now commonly referred to as a "growth at a reasonable price (GARP)" strategy. Another acronym SWAN – Sleep Well At Night GARP combines the two successful strategies of value & growth investing –Value investors look for relatively cheap shares compared to their earnings & NAV –Growth investors look for companies that will grow faster than others Growth at a Reasonable Price

122 GARP investors do not look for companies in trouble or drastically undervalued, nor do they look for high-flying growth shares –Stop short of investigating the companies’ business in great detail –More concerned with historical growth & stock price than qualitative factors –Seek growth from: The firm itself (Organic Growth) Headline Earnings growth (HEPS Growth % > 15) PEG ratio < 100 Growth at a Reasonable Price

123 Filter: GARP Select Default

124 GARP might sound like the perfect strategy (S.W.A.N.). –Being greedy for both growth & value is not easy. –If not mastered, you could buy mediocre shares rather than good GARPs. Problems: GARP

125 Strategy: Investing for Dividends

126 Most straightforward share selection strategy Pick investments that provide a steady stream of income every month, quarter or year Combination of ordinary shares, bonds or preference shares that pay regular & substantial dividends Assess older, more established firms that have a very predictable earnings stream Investing for Dividends

127 Dividend Yield = Dividend/ Price x 100% = 6c / 100c Dividend Yield = 6% Ave. Dividend Yield = 2.4% Dividend investors want 5%+

128 On R1-million investment, this would produce R – R in income, tax free Do not invest on the basis of dividends alone - high dividends do not mean that it is a good company Dividends are paid out of net income –Lower retained earnings (Future growth?) –Large dividends would be better spent invested in the company. Investing for Dividends

129 Value of original investment can drop. Dividend distribution & level of payouts are not guaranteed with shares as with bonds. Should the company experience financial hardship or a great investment opportunity comes along that requires significant cash outlay. Investigate company fundamentals & not do not just look at dividend yield. Income investing is not perfect. –Maintain a well-diversified portfolio. Risks: Investing for Dividends

130 Filter: Dividends Select Default

131 Recommendations Large Caps Investing for Dividends BFA Consensus Buy Recommendations Undervalued, Quality Shares IFR Daily Recommendations Small Caps

132 Investment Strategies Value Investing Objective: Defensive investment in bear market Growth at a Reasonable Price (GARP) Objective: Look for undervalued & high growth potential stocks (Bull Market) Investing for Dividends Objective: Assess older, more established companies for regular & substantial dividends

133 Develop your own style of investing –Match investment strategy to your personality “It is far better to buy a fine company at a fair price, than a fair company at a fine price.” Decided, based on fundamental analysis a share is a good investment … The next question is … when to buy? Conclusion: Investing

134 (011) Thank You Contact Us

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