Carefully Calculated Risks

Carefully Calculated Risks


Current investments

When the Rand was very strong early last year, Anil moved his entire investment portfolio into offshore cash. “Most investors would not have found this particularly exciting – but, when global stock markets fell due to negative sentiment around the debt issues of the US and Europe, I had the perfect opportunity to switch my money into global equities. I did this based on my evaluation of the risks involved along with the potential future returns that might be achieved from the strategy.”

What do you think makes for a good or bad investment decision?

First and foremost, one must strive to avoid making permanent capital losses. The next requirement is that the asset should offer attractive future returns, based on a careful evaluation of sustainable cashflows, intrinsic value and macro factors. When these conditions are satisfied, it’s a case of allocating capital depending on a calculated perception of the attractiveness and certainty of the outcome. Don’t attach any timeframe by which one should sell an investment. Rather, it should depend on the environment and market prices, both of which should be monitored closely.

Bad investment decisions are made when one doesn’t have the requisite skills, knowledge or experience, and only a huge amount of optimism and self-confidence.

Where do you believe the best investment opportunities lie?

It really depends on what your particular objectives are. Some investors might want high potential capital growth regardless of risk, while others may want stable yielding investments to fund their spending in retirement, and so on. In the end, ensuring that your investments match your objectives, and are low cost, tax-efficient and have the ability to outperform their benchmarks over the appropriate time-frame will maximise your chances of success.

More specifically, one should perform a careful analysis of the environment along with understanding the price to value relationship of the various investments that are available. All too often, investors focus on relative attractiveness without considering whether an investment makes sense in absolute terms. In short, if you pay too much for an asset, you’re quite likely to make a loss regardless of how optimistic the outlook might be.

Who is Anil Jugmohan?

Anil joined Nedgroup Investments in 2007, where his duties include product development and fund manager selection. As a member of the investment team, he also has responsibility for ensuring the sustainability of Nedgroup Investments’ Best of breed offering. He has a BCom in Business Sciences (Actuarial) (Hons), and is a registered CFA. He is currently an investment analyst.

Investment philosophy

“Buy low, sell high,” Anil says. “Mostly, prices are low when other investors neglect a particular asset for reasons that are short-sighted and because they haven’t done their homework properly. Some investments will go down after buying them, and some investments will go up after selling. It’s a fact of the market — you’re never going to time it perfectly. That’s why a long-term strategy is crucial.

“If an investment goes down in value, I might consider putting more capital into it — provided that this is justified by my revised projections of the potential future returns. A long-term strategy means remaining patient. I believe that by repeatedly taking carefully calculated risks, your long term success will be ensured.”

Nadine Todd
Nadine Todd is the Managing Editor of Entrepreneur Magazine, the How-To guide for growing businesses. Find her on Google+.