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Silver-Sphere Trading Gives Top Advice About Investing In (The Right) Precious Metal

Gold is not the only precious metal worth investing in. Zoltan Erdey of Silver-Sphere Trading explains why silver should form part of your investment portfolio.

GG van Rooyen

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Vital Stats

  • Player: Zoltan Erdey
  • Company: Silver-Sphere Trading
  • Established: 2011
  • Visit: silver-sphere.co.za

“Silver is undervalued today,” says Zoltan Erdey, founder of Silver-Sphere Trading. “Historically, the price ratio between silver and gold has been 16:1. At the moment, the ratio is hovering at around 70:1.”

That is certainly a good reason to invest in silver now, but it is not the only reason. Silver is a precious metal like gold, but it is also an industrial metal. A lot of modern industries such as medicine, IT and clean energy make use of silver in the creation of components. This means that demand is only set to grow.

“Demand for silver is set to spike, yet supply, like that of any natural resource, is dwindling as time passes. This means that the gap between supply and demand is going to widen, which means that silver won’t be undervalued forever.”

But why exactly should one invest in silver? Should the aim be to make money, or simply to preserve your wealth?

Related: The Silver Lining

According to Erdey, there are three specific reasons why one should consider investing in silver.

1. To Make Money

There is no doubt that buying and selling silver can offer you a decent return on investment. For example, the price of silver has already increased by 40% since the start of 2016. But, as mentioned earlier, silver is
still very undervalued, so there is still room for profits.

“If silver returns to its high of 2011, you’d be looking at a 150% return on investment. Now that could take a decade, or it could happen in a year’s time,” says Erdey. “So there is money to be made, provided you have the risk appetite necessary for that sort of thing.”

2. Protecting The Value Of Your Rand

“If you put R1 000 under your mattress today, it will be worth quite a bit less in five years’ time,” says Erdey. “Thanks to things like inflation and the exchange rate, the value of your money is not constant.”

A good way to guarantee the value of the income you have earned is to put it into something like silver. Precious metals such as silver and gold have a 3 000-year history. Their value might fluctuate, but in the long run, the odds are pretty good that you won’t lose money if it’s invested in a precious metal.

3. Preparing For A Black-Swan Event

Things go wrong. It might seem unlikely that your money might disappear overnight, but it is not completely outside the realm of possibility. Greece offers a great example, where banks closed their doors for over two weeks with many facing tough limits on cash withdraw from ATMs.

“Precious metals offer a tangible form of wealth. A gold or silver bar is something you can physically hold. Because of this, I think it’s a good idea to at least have some money invested in it, just in case there is a catastrophic political or economic event that pulls the rug out from under the traditional banking system,” says Erdey.

silver-return-on-investment

Related: Ashburton Shares How You Can Protect Your Investment Portfolio

How Much Should You Invest?

So what should you invest if you decide that you do indeed want to put some of your money in silver?

“I don’t recommend selling everything you have and investing it all in silver. Silver, as with any other investment, should form part of a diversified portfolio. It all depends on your investment strategy — it could be 10% or 20%. You want to spread your risk. Looking at precious metals specifically, I would recommend putting 30% of your money in gold and 70% in silver. Silver is the one that’s more undervalued at the moment, so it makes sense to buy more of that.”

The Non-Numismatic Approach

There is a lot to consider when buying silver. The first, and most important distinction to make, is between numismatic and non-numismatic coins. Numismatic coins are those commemorative coins that tend to be minted in limited runs. Non-numismatic coins, meanwhile, only offer the inherent value of the precious metal.

“The price of a numismatic coin is usually more than that of the value of the precious metal used. These coins are bought to be sold to collectors, who — you hope — will be willing to pay a premium price for the coin because of its rarity,” says Erdey.

“The value of the coin, in other words, is not just about the precious metal. Non-numismatic coins, on the other hand, are not about the rarity of the coin or its value as a piece of memorabilia — it is just about the value of the metal used.”

What To Buy

If you want to invest in silver, therefore, you want to take a non-numismatic approach. You don’t want to buy a coin because it has a picture of Mandela on it, or because the mintage is limited to low numbers. You just want to go after the silver value.

That doesn’t mean, though, that you should buy any silver you can get your hands on.

“There are different kinds of bullion that you can buy. You can buy silver minted by a government — legal tender, in other words — or you can buy silver minted by a private mint,” says Erdey. “These typically come in bars and coins (referred to as ‘rounds’ when they’re not legal tender). If something has been minted by the US Mint or other internationally recognised mints and refiners, for example, people know that they can
trust it.”

Related: What Are Tax-Free Investments?

Where To Buy

As the old saying goes, if something seems too good to be true, it probably is.

“Anyone can melt down some silverware and sell you a bar that they claim is 99% pure silver. The problem is, even if the silver is pure, the market won’t know or trust the origin. So you need to make sure that you buy silver that has been minted by a trusted source. This means doing your homework and finding a dealer that is supplied by a trusted distributor. As with anything, silver is only worth what someone is willing to pay for it, so you want to buy something that you can ultimately resell. A good dealer should be able to advise you on what to buy, and provide you with bullion that can be trusted,” says Erdey.


Remember This

That old adage of not putting all your eggs in one basket is true. The key to long-term success lies in diversification.

Investing

The Comprehensive Beginner’s Guide To Investing (And Growing Your Personal Wealth)

Are you a first time investor? You may want to get some guidance before you know your way around the investment world. We’ve got you covered! Read on to learn more about the best types of investment options, strategies to grow wealth and the dangers and pitfalls to avoid in investing.

Diana Albertyn

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Why should I invest?

Keeping your life savings in your back pocket or under a mattress isn’t going to bring you the wealth you desire. “There are only two ways to make money in our modern world: By working, for yourself or someone else, and/or by having your assets work for you,” says trader, advisor, and author Alan Farley.

Investing means your money is working for you and gives you the opportunity to grow what you save or receive through inheritance. As an investor, you’ll generate money through interest on what you set aside or by purchasing assets that compound in value.

When is the best time to invest?

Start today. When it comes to investing, the magic of compounding is best achieved when you realise that time is of the essence. “Compounding makes your money work for you by earning returns today on the returns you earned yesterday,” explains Thandi Ngwane, Head of Strategic Markets at Allan Gray.

“If you start early and save consistently over long periods, less of your total amount saved will be from your contributions and more from growth.”

The earlier you begin contributing to your wealth, the more significant these deposits will be later, as your money has much longer to grow. You’ll also be able to contribute less as retirement age approaches.

But what happens if you didn’t save and invest right from when you received your first salary in your teens or twenties?

What can I do if I am only starting to invest in my 30s?

More than half of us only start saving at age 28, instead of when we start working, according to Discovery Invest. And many more adults only consider investing in their 30s, with a large number starting only when they hit 40.

Catching up on the compounded returns you could’ve accrued over the last five, 10 or 15 years becomes much more difficult with the added expenses of a typical 30-something-year-old. Major life events such as buying a home, getting married, having children and starting to save for their education can be expensive when you’re also investing in your future.

So, how do you overcome these major life events while still investing for the future? According America’s Millennial Money Expert, Robert Farrington: “The goal is financial balance. You can do both – save for the present and save for the future. But it requires a little more thought and effort.”

  • Determine your investment choices based on your personal goals and risk tolerance
  • The best way to build wealth in your thirties is still through saving, so select a portfolio allocation that matches your risk appetite
  • Maintain a diversified portfolio of low cost ETFs.

What can I do if I am only starting to invest in my 40s?

If you’re 40 and over, your main financial focus should getting out of any debt you may still have. “Becoming debt-free and then you should focus on taking your savings to the next level,” says Schalk Louw, portfolio manager at PSG Wealth.

He advises you put any additional income – salary increases and bonuses – towards higher pension fund contributions, savings or paying off your debt. “While my preference for long-term savings will always be a share portfolio, those who find its risks too high, can always consider a savings account,” says Louw.

Related: How To Make Money Investing, According To Ashton Kutcher

What should you start investing in?

business-investment

So, now that you’ve established that you’re ready to invest, you should be considering your options. First, let’s look at the basic investments to start with:

1. Investment accounts

If you’re looking to save towards long-term financial goals, this is the type of account you should consider opening.

This investment can be used, for example, to supplement your pension or other income upon retirement, an investment account is an ideal way to maintain a good standard of living. An investment account is designed to set aside assets like stocks and bonds as income during retirement, to save money for your child’s education, or to put down a deposit for your first home.

2. Equities

Buying shares or equities gives you ownership of a certain percentage of a company. As a shareholder, you’re paid dividends – a portion of the companies’ profits. Shares are a risky, but beneficial form of investment. On the one hand, a decline in share price reduces the value of your investment, while the benefit of dividends is that they attract less tax compared to the other sources of investment returns.

Shares may take a significant amount of time before yielding dividends, but for long-term success, when your dividends pay out, they can be used either as income or as a reinvestment into your share portfolio.

“The combination of dividends and the growth in capital market value of your shares over time is the total return for your investment,” according to Discovery Invest. “It therefore gives you the best chance of beating inflation.”

Some of the pitfalls of equity investment, says Craig Hutchison, CEO Engel & Völkers Southern Africa, include:

  • Share prices for a company can fall dramatically
  • If the company goes broke, you are the last in line to be paid, so you may not get your money back
  • The value of your shares will go up and down from month-to-month and the dividend may vary.

Reduce your risk by investing in various sectors and shares.

3. Unit trusts

If you’re seeking an investment that provides you with easy and affordable access to financial markets, unit trusts are an option. Not only is this a smart way to save, while beating inflation, but a unit trust offers you exposure to a range of assets, explains Hutchison.

“Your money is combined with the money of other investors who have similar investment goals,” explains Ngwane. “Our investment managers use the pool of money to buy underlying investments to build a portfolio that is then split into equal portions called ‘units’. Units are allocated to you according to the amount of money you invest and the price of the units on the day you buy them.”

Hutchison notes the following disadvantages you should be aware of before investing in unit trusts:

  • There are costs over and above those you’d pay if you were investing directly
  • Unit trusts may not be as liquid as some other investments
  • Reliance on managers to select the best appropriate funds.

Related: Now Almost Anyone Can Invest In A Hedge Fund

How can you continue to grow your portfolio?

portfolio-growth

More complicated investment options

Investing in the JSE

When buying shares, there are three crucial considerations to be made: Which company’s shares  to buy, the number of shares you want and how much you’re willing to pay for them.

The next step is an online, in-person, or telephonic discussion with your broker who’ll then forward your request to the JSE. Thereafter, your bid joins other requests to buy or sell shares on a central order book.

Finally, should the price you’re offering match with a seller at the same price, the JSE will ensure the transaction takes place, making you the new owner of the shares you requested.

Be aware of the risks

You could lose everything if you invest in one share and that company goes bankrupt. “You can diversify by buying into many different shares. An easy way to do this is to invest in something like an exchange-traded fund (ETF),” suggest experts from the JSE. “An ETF is essentially a basket of shares. You buy the basket and get anywhere from 10 to 600 different shares in that basket, reducing the amount you would lose if one company were to go bankrupt.”

Online share trading

As a potential first-time online investor, you may begin your journey by surfing a number of online share trading websites either those offered by all the major banks, or other providers.

“The biggest investment you make at this stage is in time,” says Brett Duncan, head of Standard Bank Online Share Trading. “You need to spend at least seven hours a week educating yourself – either studying newspapers or financial magazines, or tracking your portfolio.”

Be aware of the risks

According to PSG Online, no one should trade shares unless they have instituted risk control measures such as putting ‘stop loss’ controls in place. Share trading requires a high appetite for risk, time to watch the markets and an expert knowledge of the markets and trading process.

Darren Cohen, head of marketing at PSG Wealth, explains: “Making an informed financial decision is key to mitigating risk where one has considered the options that would best suit their personal needs. It‘s for this reason that client education is imperative to PSG Online’s mission of creating wealth for our clients.”

Offshore investing

This type of investment affords you two options, says Maarten Ackerman, chief economist and advisory partner at Citadel: You can either take money out of the country by converting it into hard currency and investing it overseas, or you can choose a rand-denominated investment via a South African unit trust.

Should you select the second option, your money is consigned in a rand-denominated asset-swap fund, and the unit trust uses that money to invest offshore. When the money is eventually repatriated, it will be paid out in rands.

“Politically risk-averse investors will prefer to make use of direct offshore investing, as with this option the investor never has to repatriate or convert their investment back to rands,” says Magnus de Wet, director of Vista Wealth Management. “With a weakening rand, direct offshore investing would be the preferred investment approach.”

Be aware of the risks

Investing in any type of commodity involves potential loss. Two of the measures you can take to reduce risk are:

  • Investing in low risk commodities, for example, a fixed deposit with an offshore bank
  • Diversifying your offshore investment portfolio adequately to balance out high risk offshore investments with more conservative, secure investments?

As a newbie to investing you be risk averse, so high-performance offshore investments, although brimming with the promise of very high returns, are not recommended until you know your way around turnovers and returns.

Related: Becoming A Self-Made Millionaire: 5 Things To Do To Become Wealthy

How to make money investing

business-investment-cash

Contrary to popular belief, you don’t need (a lot of) money to make money. Wealth isn’t a prerequisite for investing. You can take advantage of investing over time, if you start sooner rather than later. While this means you’ll have to wait a little longer before quitting your job in favour of early retirement and living off your dividends, the long-term rewards are lucrative.

Remember these crucial pieces of advice before making your investment decisions:

  • Diversify your portfolio, so you never have all of your money invested in one account, venture or business. The best way you can manage risk is by not putting all your eggs in one basket
  • “Be careful who you trust with your money, make sure you invest your money with a reliable and established company with a solid history and reputation, do your research and do not be afraid to ask questions,” advises Craig Hutchison, CEO Engel & Völkers Southern Africa
  • You can achieve a great deal by simply investing or saving portion of your salary every month
  • Know the difference between investing and saving. “Saving is storing your money, while investing is growing your money,” he says. “One of the significant differences between the wealthy and not-so-wealthy is that wealthy individuals earn interest while everyone else pays interest.”
  • “The way that the prosperous continue to build their wealth isn’t really a secret – they spend less than they earn, save the difference, and let the potential of compound interest make their riches grow,” says Hutchison.

“Financial wellbeing is a long-term commitment, but with the right guidance, discipline and savvy decision-making, you may achieve your goal sooner than you think. It is never too late to start investing in your financial well-being,” he concludes.

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Investing In Wealth-Generating Assets

With returns of between 10% and 16%*, impact investing offers more than just the chance to do good.

fedgroup

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Through a combination of innovation and technology, investors are finally in a position to own a stake in lucrative farming operations without high cost barriers, while at the same time having a positive impact on the environment.

Global trends, local applicability

There has been a recent trend towards socially conscious investing, known as impact investing, which has gained significant traction in first-world markets. Younger investors in particular want their money to do good in the world, but still expect a good return on their investment.

This trend, combined with the desire of many entrepreneurs to own a viable side-hustle, provided the impetus behind the creation of Impact Farming by Fedgroup.

Impact Farming differs from conventional impact investments in a number of ways. Other impact investment products usually consist of portfolios that offer access to shares in companies that meet certain social and environmental criteria. South Africa’s leading independent financial services provider, Fedgroup, in contrast, believes that investing directly in ventures is a smarter alternative.

Related: Balancing Business And Investment Risks

The perfect side-hustle

bee-farming

That’s because investing in shares and funds can be unnecessarily complex and often diminishes returns through hidden costs. In addition, barriers to entry can be prohibitive. Fedgroup has therefore leveraged the ubiquitous nature of mobile to deliver a fast, lucrative way for investors to directly own assets in high-yield farming ventures. It’s the perfect side-hustle, without the hassle.

Fedgroup’s Impact Farming investment platform offers investors access to a growing network of local crowd-funded farming ventures that generate solid profits to deliver competitive returns. From as little as R300, investors can own assets across three different ventures, blueberry, sustainable honey and urban solar farms.

Investors buy assets at one of Fedgroup’s approved sites, forming a venture network that is managed by farming experts.

Tax benefits and passive incomes

Investors get paid in regular cycles for the yields their assets produce once they are harvested and sold to Fedgroup’s contracted customers. This money can then be enjoyed as passive income or reinvested to benefit from compounded growth. Impact Farming assets also qualify for a tax benefit associated with renewable energy and sustainable farming.

Not only does this model significantly lower the barriers to entry inherent in traditional fund investing, but it also allows socially conscious investors to make a big impact with their money, regardless of the amount invested.

And there’s also less risk compared to various traditional investments thanks to the innovative approach. Extensive due diligence is performed on every product line to ensure its viability before it is brought to market. The company then carefully vets and selects Impact Farming ventures for both the financial impact they have on investor wealth creation, and the positive impact they have on the world.

Related: More Than Sun In Your Eyes: Fedgroup’s Impact Farming Solar Offering

Considering risk

Fedgroup also built market-tested financial models that were deliberately designed to be conservative when forecasting returns. However, as the profits from investor assets are pooled, so too are the yields, which mitigates the risk of individual assets underperforming. And with service level agreements in place with providers, Fedgroup ensures that assets continue to perform in line with projections, unlike the unpredictable nature of company shares.

The assets are also insured, the cost of which is included in the purchase price. Therefore, if an investor’s asset is ever destroyed in a natural disaster, Fedgroup replaces it. This asset class also runs counter to market cycles and therefore offers diversification that is virtually unmatched.

Fedgroup’s Impact Farming platform offers a unique wealth creation tool for a new breed of investor.

* The projected returns of between 10% and 16% per year are the asset owner’s internal rate of return (IRR). This is the rate of return after the initial purchase price has been subtracted, and which also takes into account the time value of money. For instance, a R4 000 beehive is projected to produce a total income in excess of R9 000 over its 10-year term, which represents an average return of 23% per year. If the IRR calculation is applied, it provides the projected IRR of 15% p.a.

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What Is Genuine Wealth?

Genuine wealth accounts for what we value most and allows us to objectively assess our real assets (our strengths) and opportunities for developing our real wealth potential.

Dr John Demartini

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So often we toss certain common words around – like the words ‘genuine’ and ‘wealth’ – as if we fully understand what they mean. But, do we actually and fully understand the original, deeper meaning of these significant words? Maybe it would be wise and worthy to explore for just a moment what the two words ‘genuine’ and ‘wealth’ might have originally meant or at least could mean to us today. The word ‘genuine’ comes from the Latin word ‘genuinus’ which means ‘innate’ (true, actual or sincere). And the word ‘wealth’ comes from the Old English words ‘weal’ (well-being or whole-being) and ‘th’ (condition), which taken together means ‘the condition of well-being or wholeness’.

Of course, when the two terms are combined, ‘genuine wealth’ could now be perceived as relative, and as having widely different applications. Originally, genuine wealth signified real or sincere well-being and was applied to eternal spiritual as well as temporal material welfare. Later wealth was used in the sense of large material possessions, or of what seemed large to those who had little. It has been stated, ‘without ambition, without aspirations, life is not worth living’. The noblest of all ambitions is liberation or freedom from physical or social bondage, slavery and constraint and this independence demands genuine wealth or the empowerment of all areas and aspects of our lives.

Genuine wealth is a vital force, one of the greatest of forces for the enfoldment of culture and the birthing of liberty. Genuine wealth dominates everywhere, exercising its forceful influence on both spirit (the liberated or inspired mind) and physical resources, or matter. In the genuine wealth of the world is the accumulated power of civilisation. Genuine wealth is the measure of human progress and possibility. Where there are no storehouses of genuine wealth, there can be no storehouses of fulfillment, nor inspired beings or great knowledge. And where there is no learning, there can be no individual or social progress. The existence of culture, whether it is part of a nation, or now a global society, begins with the creation of genuine wealth, i.e. individual and even cultural wholeness.

Genuine wealth represents the people, places, things, ideas, actions and events that make life worthwhile or valuable. It is the experience of a life worth living and one that is aligned with our true, highest and most meaningful values and/or principles; not only as individuals, but also collectively as families, communities, cities, states, nations and someday worlds. It is the actual condition of our collective well-being (spiritually, mentally, vocationally, financially, socially and physically) that make up true and genuine wealth.

Related: 8 Rules To Build Wealth When You Weren’t Born Into Money

Genuine wealth is measured and assessed by the conditions of all things that make life collectively valuable and meaningful and it implies total or whole life wealth. Many people are accustomed to looking at wealth strictly in financial terms or earthly property and physical possessions and yes, this too is also essential for individual and social development and progress, but genuine wealth is much more than that and we know it intuitively. It can include inspiring ideas or causes, intellectual properties, business ventures and assets, financial investments, family relations and possessions, social influences and causes and physical talents or even beauty.

Conventional economics and business indicators of prosperity like GDP (gross domestic product), stock market indices and other economic indicators are important and certainly contribute to one facet of wealth, but they all make up only a part of what could be properly defined as genuine wealth.

Genuine wealth involves real value, which represents the diversity of words that make our lives admirable and merited and truly worth living. Where we spend our money discloses our true values and what we hold to be important. Genuine wealth represents all the things that make our lives meaningful, that resonate with our truest nature and more holistic being centred within our hearts. Genuine wealth is an accounting of life; like a window onto our souls, or a mirror image of our genuine selves. Genuine wealth emerges when we are being in touch with our highest core values, our complete life assets and our full awareness and potential. Genuine wealth includes all assets that contribute to our complete and balanced state of living and being. Genuine wealth accounts for what we value most and allows us to objectively assess our real assets (our strengths) and opportunities for developing our real wealth potential.         

For more information on Dr John Demartini visit www.drdemartini.com

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