The Investor Diaries: Week 3. And Investor Profiles.

Welcome to the end of the third week.

For those interested in such things, South Africa’s rand has been strengthening. And contrary to popular supposition, this has not resulted in a general strengthening of the stock market – so much for heuristic rules of thumb. If you’re a believer in the currency and the stock market improving together, then you’re likely to believe something like

“We’re looking at too small a window here – equity investors are being cautious about reading too much into the Rand recovery“

“Actually, the equity markets are just reacting to Sunday’s news that South Africa’s economy is not, ~~in fact~~ according to official Nigerian statistics, larger than the Nigerian economy.“

Alternatively, you could just think “Markets are crazy and only predictable when it’s already obvious to everyone else“.

That aside, if you’ve been following along with the Wednesday posts, you’ll know that The Investor Diaries is devoted to tracking the performance of 9 different investment options for the small-time investor. Unfortunately, this requires the use of price quotes and spreadsheets – and I have been informed by the greater public at large that figures and tables are the ultimate deterrent to reading a post.

So I’m going to try and make each option more relatable by giving it personality in the form of an investor profile. And then each Wednesday, each investor will give a small rendition of his week*.
*Let’s see how long it lasts!

Here goes…

Investor 1: The Contented Pragmatist

The Contented Pragmatist is cynical, bemused and disinterested in bonds (they’re unproductive) and gold (the ultimate fear-based investment). He’s a devout believer in the fallibility of human behaviour, and quite convinced that it’s unnecessary to pay fees to an investment manager who claims to understand the fallibility of human behaviour enough to take advantage of it. So he invests in the Satrix Top 40, where the fees are low and the underlying assets productive.

Expect sarcasm and derision, as well as much gloating when he’s proved right (even if it’s only temporary).

Investor 2: The Recent Finance Graduate

The Recent Finance Graduate has just finished three years of downloading lecture slides and answering multiple choice quizzes on investment theories. Of course, the fact that these were theories favoured by a lecturer who had failed in the real world of investment should have been an obvious red flag – but the Recent Finance Graduate spent more time watching football games at pubs than he did paying attention to such inconvenient truths.

So having blustered his way into a badly-paid internship at a small finance house, he’s decided that it’s important to actually have some skin in the game (the first of many tired clichés that he will use in regular conversation). Being relatively savvy with his internet banking, he applied for an FNB Share Saver account and bought shares in Naspers. Fees, you say? What fees?

Investor 3: The Goldbug

The Goldbug does not believe in modern-day currency. Or in Reserve Banks. Or gun control. He’s deeply distrustful of the right-wing homosexual agenda, and likes Tea Parties of the let’s-not-pay-our-taxes-because-that’s-just-legalised-expropriation-of-property-just-like-pro-abortion-laws-are-legalised-murder variety. He does not beat his wife – although he understands the urge. And he goes to church every Sunday, where he particularly enjoys scripture readings from the book of Revelation.

He’d like to buy gold outright, but his wage doesn’t quite permit that. So his pastor advised him to buy an ETF that holds gold – because that’s where his pastor puts all the collection money.

Investor 4: The Daredevil

The Daredevil drives a fast car and regularly flips off elderly people who try to jump queues. If he’s going to invest, it’s going to be in something as high risk as possible. Small investors can’t really afford to be part of private equity – but they can put their money into a Unit Trust that invests in small companies. So he invests in Nedgroup Unit Trust Entrepreneur A.

Investor 5: The South African Bear

The South African bear is always on the cusp of moving to Australia, spending his time bemoaning the state of crime and Eskom and the ANC. His facebook feed is a combination of shared articles on how South Africa is “going to the dogs”, and pictures of himself wearing a bokke jersey while surrounded by staffies.

Luckily, he has a friend that recently came back from a holiday to Zimbabwe, and had some spare dollars. So the investor swapped his buffalo notes for some Benjamin Franklins, and placed these carefully in a small box underneath a loose floorboard in a his cupboard. Next to his collection of bondage porn.

Investor 6: The Art Enthusiast

The Art Enthusiast doesn’t understand all these things, and would prefer not to be having this conversation at all.

However, he does like to spend time in second-hand bookshops and antique stores, because you never know what you might find. And what he found was a first edition copy of Keynes’ Treatise on Money (Volume 1). So he bought it without checking to see if the price was reasonable.

However – as The Contented Pragmatist might point out – the world of collectors is even more emotional than the world of investors. And there’s less money in it. But hey – at least it’s there in hardcopy.

Investor 7: The Honourable Jeffrey

*insert snooty British accent*

Money, sir, ought to be kept in the bank. And that’s where I’ve kept it. In a fixed deposit account, earning interest. I do not diddle around on exchanges like cockey street vendors in some London street market. Heavens no.

Investor 8: The Circumspect Whore

This investor is highly suspect of placing all his eggs in one basket, unless it’s a giant basket filled with everyone’s eggs. So he invests in the MSCI World Equity index, and let’s his money rub up equally against that of Warren Buffett and that of the lowly office-cleaner whose retirement fund contribution gets made monthly by her employer.

Investor 9: The Scrooge

The Scrooge puts his money in bonds. And spends so much time making sure that he’s risk-protected from inflation and from equity that he forgets to check the fees. Because buying bonds (and by that, I mean the RMB-Inflation X ETF) on FNB Share Saver is near doomed from the start.

Here’s Week 3 in table form: