RYK VAN NIEKERK: Welcome to this week’s edition of the Be a Better Investor podcast. My name is Ryk van Niekerk and in this podcast series I speak to leading South African professional investors about their investments, and we take a peek into how they approach personal investments. We try to understand how they analyse investment opportunities, what shares and asset classes they invest in, and whether they have more hits than misses.
In terms of my background, I actually did a degree in chemistry and applied maths. I did an honours in chemistry and started working as a computer programmer for a company called All Things Digital, and then went on to Southern Healthcare. MIKE ADSETTS: I joined Alexander Forbes Asset Consultants as a junior consultant while I was doing my MBA. So it was an opportunity that came up at Alexander Forbes, and it was there that I started getting exposure to funds, to the industry, to investments, investment strategies.
RYK VAN NIEKERK: So it has been quite a journey. Can you remember what the very, very first share you bought was, and when that was? Everything I’ve done from an investment perspective has always been in the realm of how I minimise my tax threshold, how I minimise the costs that I can pay on those. MIKE ADSETTS: The risk I take is equity risk. I maximise the risk I can take at an asset-class level. So that’s the one perspective. And the funds that I invest in have 80%, 85% growth exposure. So from that perspective it is the riskiest of the portfolios in the portfolio suite that we manage in the business. There I take risk.
MIKE ADSETTS: Yes, there are. I’ve got exposure to hedge funds, I’ve got exposure to infrastructure. So the funds that I’ve selected are the riskier in the portfolios that we manage, and we manage a broad suite from [the] extremely aggressive. I would not think that an 85% exposure to growth assets is not a risk exposure. So yes, that’s kind of how I’ve done it. You know, currency is a medium of exchange and for me I cannot understand what the underpin of the value of a cryptocurrency is.
Understand with the more risk you take in the market there’s no guarantee that risk pays off. You know, higher risk, higher return; higher risk potential for higher return. And if there’s a mismatch in terms of your expectations or your timeframes, it can be unrewarded. So be mindful of that. MIKE ADSETTS: I think the first thing you need to think about is: What am I actually trying to achieve? What’s the purpose of my investments? Am I saving because in 20 years’ time I want R1 million or $1 million, whatever?
And then you’ve got to sit down and say: To get to my goal, this is what I need to invest in. Let me look at the downside. Am I prepared to wake up one morning and the markets are down 20% or 30% or 40%? How am I going to feel? Am I going to panic? The point is you’ve got to go through the mental framing exercise to say: What am I trying to achieve? How long am I going [to take] to get there? Is that within the realm of possibility or what portfolio do I need to invest in, or what shares do I need to invest in to get there?
Most of the training when you fly an aeroplane is about what to do when things go wrong. So there’s a stack of what they call ‘standard operating procedures’. The whole point is that you are so well prepared that when things go wrong you don’t think any more.