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Which asset managers can beat the market?

There are currently hundreds of unit trusts from which to choose; what you opt for depends on your personal circumstances, so it’s best to consult the experts.

Eamonn Ryan

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Unit trusts (also known as “collective investment schemes”) effectively pool the investments of multiple investors and provide them with access to professionally managed investment opportunities that they may otherwise not be able to access alone.

Unit trusts have a number of important features:

  • Security – the unit trust is highly regulated. That is not to say that there are no investment risks, but rather that investors are not likely to be defrauded
  • Transparency – both charges and underlying portfolio holdings are available to investors
  • Performance – fund performance is reported on regularly in the financial media
  • Liquidity – investors can access their investment on a daily basis, though one must guard against the temptation of accessing one’s investments to finance current expenditure
  • The main advantage of investment in the unit trust is that it is a long-term savings platform
  • Accessibility – minimum once-off and monthly debit order amounts are within the financial means of most income earners
  • Investment management expertise – unit trusts are managed by professionals who have the time, experience and access to information to best meet the portfolio’s benchmarks

However, it should be noted that for private small investors, even heads of major fund management companies such as Sanlam Investment Management MD Armein Tyer, say that exchange traded funds such as the JSE’s Satrix series are a lower-cost, safe alternative to unit trusts, not yet fully exploited by private South African investors. These funds give exactly the same performance as the JSE, or individual indices of it, such as Financial or Industrials – without the cost of a  fund manager.

Paul Hutchinson, head of collective investments at Cadiz Wealth, says the “best unit trust” will be dependent on an investor’s personal circumstances.His pointers also reflect the need to be forward- rather than past-performance focused. “The domestic money market sector was the best supported sector in the unit trust industry for the sixth consecutive quarter to end-June 2009, and money market funds now constitute more than a third of total unit trust industry assets.”

The total size of the industry as per association statistics at 30 June 2009 was R702 billion. The industry currently consists of 884 funds. With the implementation of consumer protection legislation, the Financial Advisory and Intermediary Services Act (FAIS), on 30 September 2004, there has been a marked change in investor behaviour in that most of the asset flows have been into money market and longer duration fixed interest funds and away from pure equity funds.

Hutchinson adds: “While this conservative strategy has served investors well over the past year, this investment in cash does introduce a new risk in a decreasing interest rate environment.

Also appealing to the conservative investor, is a series of unit trusts known as guaranteed funds or real-return funds, which aim to guarantee a return of, say, 5% over inflation. Asset managers such as Old Mutual Investment Group specialise in such funds, though all major asset houses offer them. With these, you take greater risk through a higher weighting in equities, but will equally be denied the full return in a bull run.

The major asset management houses – Old Mutual, Sanlam, Momentum, Stanlib and Coronation – each offer an exhaustive list of mandates which should cater to all investors’ needs and risk profiles.

No easy decisions

Once you have made the decision to invest in, say, equities over cash, bonds or property, the choice of fund manager becomes complex. There is a debate among fund managers regarding a passive versus active approach to fund management.

All fund managers aim to beat the equity market, but logic dictates they cannot all do so (as the index is an average). In fact, according to Andrew Newell, head of new business at Cannon Asset Management, “research shows that globally, over investment periods of five, 10 or even 20 years, about 75% of investors fail in their quest to beat the equity market.

“By extension, only a modest 25% of active investment managers are successful. This result suggests that for most investors, a passive investment is the correct decision.”

An active management philosophy, as shown in the “balanced mandate” fund, has become more popular over the past six months of equity volatility. Its major advantage is the fund manager’s ability to switch between asset classes as economic fundamentals change.

Active investment

Candice Paine, head of retail at Sanlam Investment Management, offers this advice for investors who opt for active investment: “Consistent performance is a difficult target and requires a fund manager to focus on the risk of the bets that he is taking and the contribution of this risk to overall portfolio volatility.

“Flexible mandates are ones which allow material changes in asset allocation depending on the view of the fund manager, so in the most extreme cases these funds may invest 100% in equities or 100% in cash,” says Paine.

“In practice this usually doesn’t happen for two reasons; a fund manager’s conviction isn’t usually that polarised, and it is an expensive exercise to reposition big funds. The benefit of an asset allocation fund is that you get diversification across asset classes which can limit fund volatility in the short-term.”

Before becoming a financial writer and freelance journalist in 1997, Eamonn Ryan was a legal adviser, company secretary and alternate director at listed company Cashbuild Limited from 1988 to 1997. Since becoming a financial writer, he has focused on the business and financial sectors, as well as personal finance, writing for Finweek, The Star Business Report, Sunday Times Business Times, Business Day, Mail & Guardian, Entrepreneur, Corporate Research Foundation (which brings out a series of books each year ranking SA’s best employers and best managers), as well as a host of once-off and annual publications such as ‘Enterprising Women’ and ‘Portfolio of Black Business’. He also writes media releases, inhouse magazines and sustainability or annual financial reports for various South African corporates and financial services groups, including the Ernst & Young annual M&A book.

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(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 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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