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Asset Allocation is Key

Base your decisions on long-term planning for financial success.

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The theory behind successful investing is simple to understand but not easy to implement. If you are going to be a successful investor over the long term, you will have to develop the ability to ignore the noise (or hysteria) created by the financial media. Their job is to create hype so that people will notice them every day; unfortunately, what they report is often not going to help you as an investor. Your investment decisions must be taken with a long-term view and daily news is not going to help you — you need to create your own parameters for making decisions. The decision about how much capital to allocate to different types of investments ie shares, property, cash and bonds is more important than any other investment decision. This should be the guiding principle for all your future decisions and should occupy the bulk of your initial attention when you invest. Unfortunately, most investors spend too little time on this critical factor which leads to poor investment returns over the long term.

Shares are the best asset class of all

History shows us that there is no better long-term investment than the stock market unless you are prepared to invest in your own business. The table on page 71 shows the long-term real return of the main categories of South African investments — also known as asset classes. The table includes the 2008/09 calendar years when the stock market fell by more than 30% in 12 months. Even after this drop, we see that shares outperform all the other asset classes. The table also shows that cash is a very poor investment. It is clear that you don’t need to be a genius to get great returns, simply buying the index will provide great long-term growth.

Asset allocation is important

If you decide that you don’t like the roller coaster ride of investing in shares, and would prefer to keep your money in cash, you should know that you will probably not achieve financial independence.

Shares

are very volatile but they will reward patient investors with excellent capital growth over time. A portfolio of high quality shares will always recover after a market crash even if one or two shares collapse — so you should always try to have some exposure to shares. If you accept this principle then the real question is how much of your capital to invest and what to do with the rest.

The table above shows us that bonds only generate 2% per annum above inflation but one needs to remember that they are very low cost investments and are significantly less risky than shares or property. For the investors who want to be relatively certain that their capital will be securely invested and still beat inflation, they should have the bulk of their capital in bonds with at least 25% in shares. The shares will ensure that your overall capital growth beats inflation whilst the bonds will provide some growth but mainly capital protection. For investors who want high levels of capital growth, you should have the bulk of your capital invested in shares and only a small portion in bonds — no more than 25%.

Cash should be used as an insurance policy only – you should have a maximum long-term holding of six months’ worth of expenses in cash. If you have cash lump sums to invest and are nervous about the markets, you could phase your money in over 3 – 9 months to limit your initial losses if the market falls in the next few months.

Market timing is pointless

The All Share Top 40 Index has averaged 14,68% per year from December 2005 to end December 2010. These are great returns and were achieved during a time when the market lost more than 30% over 12 months. It shows that you don’t need to be a market timer to get good returns, you can simply buy and hold. People who predicted the market crash in 2008 (there were a few) almost certainly did not re-invest their capital in November 2008 and/or March 2009 when the market was at its lowest. The explanation for this is simple: it is much easier to know when to get out and far more difficult to get back in again. Usually people wait far too long and miss the great returns offered by the early rebounds. Most people wait for the markets to “stabilise” which is a mistake. Stable markets usually occur at the top of the market just before the next market crash! The lesson from this is that you should not focus too much on the short-term movements of the stock market.

In summary, having the right combination of asset classes is the most important decision to make, getting this step right will have a massive impact on your long-term success. All your other decisions should lead from this first step.

Investing

(Infographic) The 10 Things You Should Cover In Every Investment Pitch

If you want to wow potential investors, you need to cover your bases.

Matthew McCreary

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If you’ve ever watched Entrepreneur’s original series, Elevator Pitch, then you’ve probably seen smart founders make dumb mistakes while pitching their ideas to potential investors. They might flub an answer or get tongue-tied, or they might just be a little boring. Other times, you might notice that something seemed off about a pitch, but you can’t quite put your finger on why.

Investors are gambling every time they put money into a new project or idea. Your job when pitching is to prove to them that you’re worth the risk. That means you’ll need to not only show them the possible upside of what they have to gain, but also be clear about what they could possibly expect to lose and their odds. In other words, you need to give them a holistic view of what you do, not just the one good idea.

You might have pitched an investor yourself and thought you crushed it, only to hear that the investor isn’t interested. If that’s the case, there’s a chance the pitch was missing one of 10 essential elements.

This infographic by Buffalo 7 breaks down 10 slides you should have in your next investment pitch deck. If you’re not presenting formally, though, you can still keep track of these aspects in your head and make sure you cover each one. They include:

  1. The vision, where you concisely explain your idea.
  2. The problem. Why is your vision necessary or helpful?
  3. The opportunity. What is the market size, and how can you position yourself to earn a share of it?

Related: How To Pitch Your Business, Product Or Idea To Industry Experts

This is just the start, though. Check out the infographic below to see the rest of the slides you need when pitching investors.

1541174287_investment-pitch-infographic

This article was originally posted here on Entrepreneur.com.

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‘Shark Tank’ Investors Reveal Top 5 Tips To Make Your Business Famous

Is your business worthy of fame? If so, pay attention to what the Sharks have to say …

Eric 'ERock' Christopher

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Shark Tank

Shark Tank enters its tenth season as popular as ever. Over the past decade, millions of people have watched fascinated as entrepreneurs pitched their business ideas and startups in the hopes of winning an investment and support from self-made millionaires and billionaires.

The multi-Emmy® Award-winning reality-based show has had a tremendous impact on the business world and has been a major influence on the increased popularity of becoming an entrepreneur. Over the years, the show has evolved into one of the world’s top platforms to launch a business and recently reached an astonishing $100 million in deals offered in the Tank.

I was recently invited to attend a private event hosted on the set of Shark Tank to celebrate their 10th season and met with all the Sharks and most of the guest Sharks for the current season. This year’s guest list includes luminaries:

  • Charles Barkley, Hall of Fame NBA star and TV analyst
  • Alex Rodriguez, legendary baseball player and businessman
  • Rohan Oza, an iconic brand builder and marketing expert
  • Sara Blakely, founder and owner of SPANX brand
  • Matt Higgins, the co-founder and CEO of RSE Ventures and vice chairman of the Miami Dolphins
  • Bethenny Frankel, TV celebrity, author, and founder of Skinnygirl brand
  • Jamie Siminoff, the CEO of RING, who rejected an investment offer in season 5, but went on to sell his company to Amazon for a whopping $1 billion.

My better half was also invited, and we arrived promptly on time at Studio 24 inside of Sony Pictures Studios in Culver City, CA. We were greeted by the cordial staff who informed us that the Sharks were still filming the last takes of the day. After several minutes, we were invited to chat with the Sharks on the main floor where nervous entrepreneurs excitedly pitch their companies to the investors under the bright lights of the studio set.

I was curious to know what excited the Sharks the most about their tenth season and what they believed to be the best advice for an entrepreneur to help make their business famous.

1. Create an ingenious product

When asked, Lori Greiner said, “It’s a mix, right? Of smart marketing and ingenious product. For example, Scrub Daddy was a technology. So, taking that one sponge, which was revolutionary, changed the whole sponge arena. We now have, to date, 20 different SKUs, and we have 30,000 new retail locations and 170 million in sales. That’s what takes it from one idea to a global brand.”

Of course, skillfully promoting your product on a platform like QVC is another excellent way to make your business famous. The day after the Scrub Daddy episode aired, Greiner helped CEO Aaron Krause sell their entire inventory of 42,000 sponges in less than seven minutes on QVC.

Related: 6 Great Tips For A Successful Shark Tank Pitch

2. Leverage social media marketing

barbara-corcoran

During my chat with Bethenny Frankel, she stressed, “Social networking is so important. Also being a little bit disruptive now … and you have to be creative. You have to be creative. The President was the most disruptive candidate that there’s probably ever been in history. He got people’s attention, and young entrepreneurs need to get people’s attention in some way. So be a little disruptive.”

Matt Higgins responded, “I’d say that you have to understand social and digital marketing. You can’t survive unless you understand Instagram, Snapchat or all the tools out there. You have to be contemporary.”

Barbara Corcoran claimed, “Every one of us successful entrepreneurs, for the last two years, were phenomenal at social media. It’s true. No exceptions.”

No smart entrepreneur will deny the power of social media when it comes to making your company famous. With more than 2 billion people worldwide using some form of social media, any business can put their business in front of a large audience, especially if they can create content that goes viral.

3. Build a community

Daymond John stressed the value of building a community. “You’ve got to build a community,” stated John. “Nobody needs to buy anything new in this world. They only buy it because there’s some form of community and/or need that you are supplying for them.”

John speaks from experience. He built a successful clothing empire by creating a vast community of his own via his clothing brand FUBU. John wisely invested in celebrity endorsements, making him an early pioneer of modern influencer marketing.

If you lack the resources to build your own community from scratch, you can leverage the power of others. Partnering with influencers who have cultivated their own communities allows you to introduce your product or service to larger audiences. In fact, some consider Shark Tank to be the world’s largest business influencer platform.

4. Devise a publicity hook to win earned media coverage

Barbara Corcoran also said, “I’d say you need a publicity hook. Some hook, angle or gimmick that grabs the attention unfairly from your competitors.”

Remember, Shark Tank is a unique combination of reality television, business acumen, and entertainment. Doing something unique, different, or disruptive can get you significant media attention and abundant free publicity… especially if you’re able to leverage that publicity and captivate the show’s producers, who decide your fate as to whether you’ll appear on the show.

Regardless if you want to appear on Shark Tank or not, being featured in the media is a way to differentiate your business from the competition and reach a broader audience. Be creative and willing to take educated risks when it comes to getting noticed by the media. You should always be actively building relationships with media representatives and ask for their insights when formulating your plan.

Related: Shark Tank Funded Start-up Native Decor’s Founder on Investment, Mentorship And Dreaming Big

5. Know your strengths and stay focused

When I asked for billionaire Mark Cuban’s insights, he thoughtfully replied, “Knowing your unique advantages, play to that, and your strengths. And focus. You know, what happens is very often people start with an idea, get a little bit of traction, then it gets hard. And when it gets hard, they start looking for other things to do as opposed to playing to their strengths. Because businesses aren’t supposed to be easy. You know, if they were easy everybody would already be rich, and we’d all be sitting on a beach somewhere. And so, when it gets tough, you gotta dig in and work hard. I’d say the final thing I’d add is that sales cures all. There’s never been a business that succeeded without sales. So, if you focus on selling … if you’re able to sell … and that’s something that is one of your core competencies, then you’ll be okay.”

These are wise words from one of the world’s few billionaires.

This article was originally posted here on Entrepreneur.com.

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The Best Way To Get Your Teenager To Start Investing Right Now

Jeff Rose advises a young fan on where to start his investment journey.

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In this video, Entrepreneur Network partner Jeff Rose talks about receiving a letter from a young investor, who is looking for advice on how to begin investing.

Rose talks about the act of actually doing the investing versus worrying about reading books or asking others about the process. Taking action gets the most results, since you are able to make mistakes and start the learning process. Taking action also leads to more experience, which is to say if you begin investing as a teen, you will be much more savvy about investing as a twenty-something.

In answering this young investor’s concern about investment direction – the fan hopes to balance short-term gain and long-term gain, as well as to establish some padding for a future business – Rose turns him in one specific direction: A Roth IRA. When he was younger, Rose didn’t even know what a stock was until far into his college years; during this time, he discovered the Roth IRA and learned of its compounding power, as well as the accessibility of an initial investment.

As another route, Rose also mentions starting a business. This path, Rose explains, will help you achieve the most return on investment.

Related: Making International Investing Simple And Transparent – CybiWealth Digital Platform

Click on the video to hear more tips for a younger investor.

This article was originally posted here on Entrepreneur.com.

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