To understand what a recession means for the stock market, it helps to understand exactly what a recession is.

There are a number of definitions but put most simply, it’s when there is a significant slowdown in a country’s economic activity over a period of time. Generally if there is a decline in a country’s Gross Domestic Product (GDP) for two consecutive quarters (two three-month periods) then the economy would be seen as being in recession.

The threat of a global recession is looming large because of “once-in-a-generation” factors such as the effects of the Covid pandemic and the war in Ukraine, and this has an impact on stock markets and investors across the world.

Tough times for consumers

A recession has a variety of negative effects that can be felt across society: increased unemployment as companies retrench workers; people spend less money on goods and services; companies cut down production as consumers buy fewer products and services; and wage levels come under pressure.

For the consumer, the cost of living can increase as prices of items like petrol and groceries increase. This leads to a reduction in their spending on discretionary (non-essential) items. Job losses can further affect consumers’ income levels, while it can become even harder to find employment as companies look to reduce their wage bill and cut down on new hires.

Profits under pressure

None of this is good news for the listed companies that trade on the stock market, or for those who have shares in these companies. Although the stock market is made up of individual companies that fulfil a wide variety of services and produce a variety of products, to a large degree the success of these companies is influenced by the broader economy.

If the economy is thriving, then companies (and their share prices) will tend to benefit. That means happy days for shareholders. And of course the inverse applies. If the broader economy is under pressure, or in a recession, then this will generally have a negative effect on listed companies, and their share prices.

All in all, a recession can be a scary time for investors, with wild swings in share prices, downward pressure on investments, and a distinct lack of stability and predictability.

So where does that leave you, the investor?

Take a long-term view

When you start investing, one of the most important factors to take into account is your investment timeline – in other words, how long you want to keep your money invested for. This can differ depending on what your investment goal is. For example, if you’re in your 30s and you are saving for retirement, then you’ll be investing with a long-term horizon. If you’d like to cash in your investment for a house in the next two years, then that would be considered a short-term investment horizon.

During a recession, when investments have generally reduced in value, it helps if you have a longer-term horizon and don’t rush to access your investment if you don’t need to. All markets go through cycles, and eventually a recession will run its course. Cashing in investments during a recession, or “at the bottom”, can be avoided if you are able to sit tight and stick out the downturn. Yes, it’s hard not to panic when you see the share price plummet, but panic doesn’t make for good investment decisions.

As American investment guru Warren Buffet says, “It won’t be the economy that does in the investor over a five, 10 or 20 period – in my view, it will be the investors themselves … if you look at the record of the 20^th Century you’d say ‘How could anyone have missed in owing equities?’ and yet we had all kinds of people wiped out … if you had just owned stocks straight through, didn’t leverage them, you would have had perfectly decent returns.”

Diversify

Ensuring you have a diversified portfolio – one that is spread between the different asset classes such as stocks, property, bonds and cash – is one of the cornerstones of sensible investing. This is because it spreads your risk so that when one asset isn’t performing, you’ll be cushioned by the performance of your other assets. During a recession, when there is an increasing amount of volatility, diversification can help protect your investments.

Invest with caution

And yes, a recession can even offer some opportunities for investors because there are likely to be some “cheap” stock buys on offer.

“While a recession can be a difficult time for investors who are seeing declining values across their portfolios, it can also represent an opportune time to pick up value stocks whose price has been adversely affected by the wider sentiment. For investors, this can mean buying shares in a company that holds good fundamental value such as earnings, sales and cash flows at a cheaper price with a longer-term view of that company’s share price increasing in the future,” says DMA’s Christopher Clarke.

“A good example of a sector that tends to remain healthy in a recession are consumer staples such as basic goods that support everyday living. Think companies like Tiger Brands or Walmart where their main form of business is the manufacturing a distribution of necessities like food. Other classic examples of sectors that do well in recessions are companies in the health care, energy and IT fields.”

But because no one knows exactly how the stock market is going to perform, or when the bottom of the market has been reached, investing under these circumstances should only be done if you’ve ticked a few boxes.

• Firstly, ensure that you have emergency savings in place that could get you through a few months. If you have extra cash left over after making this provision, then perhaps give the stock market a try.

• Again, invest with a long-term mindset. During a recession volatility is the name of the game, so don’t be surprised if your stock picks don’t behave the way you’d like. If you’re not expecting immediate returns then you’re likely to be better off.

“Running up a down escalator.” That’s what legendary investor, Warren Buffet, had to say about inflation.

And it’s true.

Growing your hard-earned money in a saving account is difficult enough. The interest rates are low. And when you factor in inflation, it’s almost impossible. Did you know that South African inflation sits at around 5.9%? That is right at the top of the South African Reserve Bank’s monetary policy target inflation range of between 3 and 6%.

That means having your money in some of the best paying easy-access accounts and even some fixed deposit savings accounts. You’re actually losing money in real terms.

The culprit? Inflation, where prices go up, and purchasing power goes down.

Investing to beat inflation is a must-do to make sure your nest egg grows faster than the soaring cost of living.

Let’s look at investing to beat inflation

Anyone can invest, even if you start with a few rands. Now, while it’s always best to get help from the experts, you don’t need a financial adviser. It’s a riskier approach, especially if you are a novice investor, so using the services of a financial advisor should be your first port of call.

On the other hand, you can use one of many online investment platforms. In this case, it’s probably best to choose a ready-made fund where you select your preferred level of risk. The platform then offers a selection of funds that suit your risk profile.

1. Diversify your investment.

On diversification, you should build a diverse portfolio, or ready-made diversified fund, with a mix of assets. These could include equities, property, bonds, and alternative investments such as gold, often seen as a safe haven that can maintain value in times of stock market turmoil. This means you won’t be overexposed to the ups and downs of assets, firms, or sectors.

2. Invest in gold.

Gold is the oldest hedge against inflation.

The shiny yellow metal has grown at an average annual gain of 9.48% over the 20 years between September 2001 and September 2021. Over the same period, inflation was much less, which means gold investors are sitting pretty with several percentage points above inflation.

3. Look for companies that can raise prices when inflation rises.

Find that business with a reputation for brilliance. Now compare it with one which has a reputation for bad economics. Which would you choose? Would you still choose the brilliant company if they put their prices up? Chances are, if you’re an intelligent investor, you will.

What this means to you and your battle against inflation is that you can invest in a business that can increase its prices without losing business. You have significant advantage during periods of high inflation because the company can now offset its increasing costs.

4. Invest in yourself.

One of the sure-fire ways of beating inflation? Invest in yourself and your own talent. This is one of the best ways to maintain your purchasing power over time and defeat inflation.

The best lawyer or accountant in town benefits from having paid for their education in  “old rands” but can now offer their services in “current rands.” That means they’re ahead of the curve, at least in investing to beat inflation

5. Keep some cash savings

Now, while we haven’t been kind to allow your money to sit in a current or easy-to-access savings account, it’s vital to do so. On that subject, you should ideally have 12 months of average income as “cash in hand”. Yes, interest rates are low compared to inflation, but if you’re faced with an emergency, like losing your job, and don’t have cash, you’re in a dilemma.

This is because ALL your money is now invested in the stock market. What if it’s a downturn? You’ll have to sell, which means losing money, and inflation wins.

The solution: find the highest-paying savings account to protect your money against inflation as much as possible.

6. Limit your wants.

This is a no-brainer. Worried about inflation and your rand simply being unable to go the distance? Cut back on the needless things in life, the stuff that can make you drown in consumer debt: the designer trainers, that overly expensive watch. Now, look at your bank account? You still have as much money as you had, giving you a considerable defence against the vicissitudes of life.

To sum up, whilst we have included practical day-to-day tips (like limiting your wants), we have also made the financial case of investing to beat inflation.

And again, that’s a no-brainer. Investing in a diversified portfolio over a more extended period is almost always several points ahead of inflation, and that’s where you want to be.

Profiting in the financial market. That’s the aim, whether you’re investing or trading. The two take different routes to arrive at this shared goal. In Investing vs Trading 101, investors seek solid returns over an extended period. So, they buy and hold. On the other hand, traders enter and exit positions over a shorter period, taking potentially higher and more frequent profits.

Let’s define the two in more detail.

Unless you’re a Wolf of Wall Street (or a Jackal on the JSC), and even then, the stock market is a complex place. So, you must understand the basics, let’s clear up any confusion.

1. What is investing?

Investing’s goal is to build wealth over an extended time by buying and holding a portfolio using financial vehicles like stocks, mutual funds, and bonds.

Investments are held for years, or even decades, and, ideally, enjoy growth, compound interest, dividends, and stock splits. As we all know, markets fluctuate, but investors will ride out the downtrends with the expectation that stock prices will rebound eventually. You can often increase your profits by compounding or reinvesting profits and dividends into additional shares or stocks.

A clever investor will do their homework before investing and look at a company’s fundamentals, like its previous financials and industry analysis, as well as a country’s macroeconomic situations.

2. What is trading?

Trading’s goal is to generate short-term returns that outperform buy-and-hold investing. This involves frequent transactions, aiming for buying-low and selling-high instruments like stocks, commodities, and currency pairs.

So, while buy-and-hold investors may be happy with 10% to 15% annual returns, traders might want a 10% return each month.

But, trading is dynamic and volatile. Its high-risk and high-reward nature is at the direct and short-term mercy of the market, so it can incur both hefty profits and losses.

A trader has different homework to do. They need to analyse a company’s performance based on the uptrends and downtrends in the market in a single day. They need to use this analysis to predict changes and trends in volume, price, and moving averages.

What’s the difference between the two?

The key differences between investing and trading are their approaches: appetite for risk and time involved. As we’ve said, investing is lower risk and rewards over a more extended period, and trading is higher risk and higher rewards over a short period. Depending on your profile, you can choose one, the other, or even a combination.

So who earns more profit, investors or traders? Both have the potential to earn profits, but traders frequently earn more profit than investors when they make the correct predictions and decisions, and the market performs accordingly.

Investing vs trading. Which one is right for you?

Your first step is to decide on your investment strategy and goals. Are you saving for retirement? Are you looking for returns today? You also have to establish your appetite for risk, as this is a key differentiator between investing and trading.

Whichever one you decide, let’s look at how to do each wisely.

The clever investor

The smart investor wants to build long-term wealth, and here are some pointers.

1. First off, define your investment goal and decide on a strategy. Are you investing for retirement or saving for your kid’s university tuition? And how much risk can you tolerate when it comes to strategy?
2. Be prepared for the long haul. Know that successful investing takes longer, so your money will be tied up, and you’ll have less disposable cash.
3. Have patience and discipline to stick through the market’s ups and downs.
4. Form a plan for buying, selling, and rebalancing your holdings. For example, some investors sell some holdings and buy others to rebalance their portfolio to existing original goals if market fluctuations have thrown it out of whack.
5. Think about choosing index funds which don’t try to beat the market but mirror its performance. An example of such a fund in South Africa is the FTSE/JSE Top 40 Index.

The clever trader

The astute trader will always minimise risk. Here’s how you can do it.

1. Go in with wide-open eyes. The stock market’s long-term average return is 10%, and many studies have shown that it’s difficult for even professional traders to beat the market.
2. Plan when you’ll buy and sell. So, sell if a stock rises or falls by a predetermined percentage.
3. Stick to that plan. Even the most experienced traders change their reasoning for holding stocks and shares, and that’s not always wise.
4. Work out how much money you can afford to lose, and don’t trade more than that.
5. Take tax liability into consideration. Tax rates differ between short- and long-term capital gains.

So before you choose to invest vs trade, sit down, and think carefully about your goals and appetite for risk. Your future self will thank you for it!

The wealthy think about money differently from the average Joe, and that’s because they don’t need to work for their money and make their money work for them. So, even while playing with their kids, teeing off, or hiking in Patagonia, they earn income without lifting a finger.

But let’s say you’re not super-wealthy and want monthly income for your retirement. What are the best ways to generate this passive income?

First, let’s take a glance at why investing for monthly income can be right for you.

You may want a constant stream of money flowing into your bank account for many reasons. Who wouldn’t? But here are a few of them.

• An early retirement
• A more comfortable retirement
• Reduced dependence on your job
• Increased financial freedom

Whatever your reason to earn passive income, and there are definitely more than the above, there are many ways to do so.

Buy-TO-let property

This is one of the most convenient ways to secure a monthly income.

You can choose a commercial property or residential property. The best investment here is in the former: a building offered as a workspace. They attract a higher rent than other real estate, so you’ll earn a higher regular income. Residential property is the next most profitable, as these are living spaces; let’s face it, everyone needs a place to live.

So how do you pay for it? A mortgage is the most obvious if you don’t have the cash upfront. You’ll need tenants to enjoy monthly income so you can pay the repayments. Be aware, though. You’ll have to foot this bill yourself if you don’t have tenants.

The long-term benefit here is that, after the mortgage term is over, you’ll enjoy a net positive monthly income in the form of rent your tenants will pay you.

Equity Real Estate Investment Trusts

Real Estate Investment Trusts, or REITs, are companies that invest in real estate for you, so all you need to do is invest in them. You can choose Equity REITs which rent out the property for income, or Mortgage REITs which sell mortgages and loans.

It’s cheaper than buying a property because you’re only buying a share of the property, not the whole thing. But it does guarantee you dividends, which are usually monthly payments.

Preferred stocks

A stock or share means part-ownership of a company. There are two types, common stock and preferred stock. Common stocks give you partial interest in the company. In contrast, preferred stocks give investors more consideration when dividends are given out. You want a preferred stock here as it guarantees you a higher income, usually paid monthly.

Living annuity

A living annuity provides you with income during retirement. With this, you decide how to structure your savings within a basket of investments. You also choose how much income to draw within the regulatory limits of 2.5 to 17.5% annually.

A living annuity is popular because it provides transparency, investment flexibility, and tax efficiency. When you pass, as we all do, the remainder of the capital is transferred to your loved ones without estate duty or executor’s fees.

Short Term Bonds

Bonds are also an excellent way to gain a monthly income. They are debt instruments that the government, an institution, or a company issues to raise funds or capital. Essentially, you are giving them a loan that they repay with interest.

The interest that bonds earn is paid before the debt is paid back. That is how you can make a monthly income. The principal amount is paid back at the end of the term (known as the maturity date). Be cautious, though. Bonds come with a risk of default, so they don’t guarantee you a monthly income; you may lose your investment entirely. This is more true when buying company bonds. Government bonds are generally far safer. But be sure to do your investment homework!

Long term bonds

Long-term bonds last between 12 and 30 years. Thus, they come with the advantage of a higher interest rate but the disadvantage of a higher risk of default. If you have a lump-sum amount and want regular income, these are options. You can also invest in local bonds like unit trusts or on the JSE.

In closing, don’t think that the list above is exhaustive. There are many ways of investing for monthly income. Fixed deposits, money market accounts, and high-interest savings accounts will generate passive income. But because they barely keep pace with inflation, if they do so, many investors wisely choose one of the higher interest investments we’ve discussed earlier.

So, congratulations! You now have a source of monthly passive income. You can join the wealthy on their hiking expeditions, have a more comfortable retirement, or rely less on your 9-5. And what’s wrong with that!

Indices are designed to measure the performance of a basket of assets. In this article, we use equity/stock indices as an example.

Still, it is important to note that their application is asset class-wide and not only limited to stocks. Beyond performance measurement, indices play an important role in the world of financial markets. Many fund managers offer unit trusts and ETFs that track indices.

These managers are known as ‘passive’ managers. Active fund managers manage funds with the objective of outperforming their adopted benchmark, and the benchmark is usually an index. If we delve deeper and consider the world of derivatives, it gets a bit more complicated.

In a nutshell, you can buy a derivative, such as a futures contract, that tracks the performance of an index like the Top 40. You don’t physically own each stock in the index. The contract you buy will mirror the index’s performance very closely.

There are more nuances to indices and index construction than one would think.

A couple of FAQs related to indexing generally go along the lines of:

1. How is the weight of a stock in the basket determined, and what is a free float factor?
2. How are corporate actions dealt with? For example, for an equity index that measures the performance of a basket of stocks assuming dividends are reinvested, when are the dividends reinvested?
3. Are gross, or net of-tax dividends assumed to be invested? This is known as a total return index.
4. Can stocks go into an index and fall out?
5. Do index providers like the FTSE/JSE have a rule book that they follow when maintaining their indices?

The above questions are important to consider when developing your understanding of how indices work and ultimately understanding what an index is.

Let’s look at the answers to these questions below:

How are stock weights determined?

The weight of a stock in a market index is generally determined according to its net market cap. The net market cap is calculated by adjusting the total market cap by the proportion of shares available to trade. This is known as the free float factor.

The total market cap is the market value of the stock. It can be calculated by multiplying the stock price by the shares in issue. Many companies have low free float factors.  For example, take a stock with a free float factor of 10%; this means that 10% of its shares are available to trade. The rest could be held by a large strategic investor or the founders who have no intention of selling them in the short to medium term.

Imagine the stock was weighted by its total market cap. Passive funds tracking the index would have a tough time buying these shares as there would be very little available to trade in the open market.

Corporate actions – how are dividends treated?

The FTSE/JSE total return indices assume that dividends are reinvested on the ex-dividend date. The ex-dividend date is when new investors/buyers will not be entitled to the dividend being paid.

In practice, a passive fund manager can’t always reinvest the dividend on the ex-date as the physical cash inflow sometimes occurs after t + 3, which is the settlement date. This will create a small degree of divergence from the return of the benchmark, known as a tracking error.

There are two types of total return indices: gross and net. Gross total return indices assume that the full dividend is reinvested and no dividend withholding tax (DWT) is paid.

On the other hand, net total return indices assume that the dividend after DWT is reinvested. The reason why there are two versions is that some investors are exempt from DWT.

For example, locally, unit trusts managed by institutional investors* are exempt from DWT, whereas retail investors pay the full 20%. *Tax will be incurred by the investor in the unit trust depending on their tax circumstances.

Index reviews and stock changes

Depending on performance and corporate actions, stocks do get added and removed from indices. This is usually done at each review.

The FTSE/JSE indices get reviewed every quarter in March, June, September and December. Any free float or shares in issue data changes are also considered in this review.

Using the Top 40 index as an example, the JSE ranks constituents/members and non-constituents/non-members on the ranking cut date. This falls about a month before the rebalance date when changes become effective.

If there are non-constituents that rank at or above the buffer of 35, the stock will be added, and the lowest-ranking constituent will be removed.

Conversely, suppose a constituent falls to rank 46 or below. In that case, it will be removed, and the highest-ranking non-constituent will be added.

Rules-based or on the fly?

All the major index providers have a publicly available methodology and rule book. This is designed to create transparency around their index construction process.

The approach adopted by each can differ quite notably. For example, the MSCI is not as transparent with their ranking cut date as the FTSE/JSE and the S&P.

We hope this answers your question about what an index is and how it works.

Let’s take a closer look at Exchange traded funds.

As the name suggests, ETFs are funds that trade on the Exchange, like shares or stocks. ETFs allow you to diversify your portfolio without all the time and effort you would usually spend managing and allocating your investments individually. So, when you buy an ETF, you buy into multiple securities wrapped into one investment.

Remember, ETF shareholders do not directly own shares of the stocks. They own shares of the ETF itself. As an investor, you can sell shares of your ETF on an exchange, much like a stock.

So, instead of having all your eggs in one basket (where all the eggs are the same), think of your ETF as a shopping basket filled with different products. The diversification of ETFs allows you exposure to multiple, even hundreds of securities in a single portfolio. It is far easier to manage than if you were to buy them individually.

Types of ETFs (exchange traded funds)

There are two broad types of ETFs:

• Passive ETFs
• Active ETFs.

When most people think of ETFs, they’re thinking about passive ETFs, otherwise known as ‘Index Funds’, because they match the performance of an index such as the S&P500. Active ETFs are actively managed by a portfolio manager who attempts to outperform the index.

Many ETFs track an underlying index representing other securities or asset types, such as stocks, bonds, commodities, or currencies.

An ETF that tracks the JSE Top 40, for example, lets you own shares in the Top 40 biggest companies on the JSE—all in a single trade.

There is an exciting array of ETFs, but these can generally be broken down into six categories: equity, fixed-income, commodity, currency, real estate, and speciality ETFs:

1. Equity ETFs: These give you access to dozens of sub-categories with some of the more common equity ETF types, such as the S&P 500 (Standard & Poor’s 500 is a stock market index that tracks the performance of the 500 largest US companies listed on the stock exchange.
   
   
2. Fixed-Income ETFs: Also known as Bond ETFs, these funds track bond market indices and common fixed-income ETF categories such as government bonds, corporate bonds, tax-free municipal bonds, international bonds, emerging markets bonds and high-yield bonds.
   
   
3. Commodity ETFs: These ETFs track the price of a commodity, for example, gold, oil, or other commodities such as precious metals, rather than holding the asset physically.
   
   
4. Currency ETFs: Just as with commodities, currency ETFs give the everyday investor access to currency markets and foreign exchange trading (Forex).
   
   
5. Real Estate ETFs: With these ETFs, an index of publicly traded real estate investment trusts, or REITs, is tracked. These are typically companies that own, operate or finance income-generating real estate. Real estate ETFs are often for investors seeking high-yielding investments
   
   
6. Specialty ETFs: One of the exciting advantages of ETFs is that they allow investors access to diverse sectors of the economy. For instance, niche market areas, such as technology, or even more narrow technology sub-sectors, such as Semiconductor ETFs or Artificial Intelligence ETFs. Other speciality ETF sectors include healthcare, industrials, consumer staples, consumer discretionary, financial services, and utilities.

Now we know about the types of Exchange traded funds, we can look at steps to invest in them.

How to invest in an index fund (it sounds heavy, but it’s not)

If you’re new to investing, ETFs are attractive because you can invest in them through any regular trading platform.

ETFs have a minimum investment requirement of a few hundred rands rather than a few thousand rands for unlisted funds. So, here are 4 steps on how you actually go about investing in an ETF:

Step 1:

Choose an investment platform. This will require opening a brokerage account with an investment platform. Remember, not every platform gives you access to every ETF.

Step 2:

Do your homework, especially if you are a beginner to ETFs. Passive ETFs (index funds) are ideal because their fees are lower than actively managed funds, and they perform relatively well over time.

Step 3:

Deposit funds and buy your ETF (you will need to deposit funds into your account to do this). You will generally pay a smaller fee (called the MER fee) to the ETF manager out of your returns.

Step 4:

BE PATIENT. One of the biggest reasons that ETFs underperform is that beginner investors panic when things may dip a little and make impulsive decisions.

Nothing in life is risk-free. Including ETFs. Here are a few things to bear in mind when investing in ETFs:

•  Trading fees: ETFs are low-cost, but because they trade like stocks, each transaction charges a commission, which can lower your return.

•  No guarantees: Like all investments, ETFs carry some risk. However, this is minimised because ETFs hold dozens or hundreds of securities in a single packaged security. As an investor, you can further reduce risk by investing in various ETFs from diverse categories.

•  Lower potential return than individual stocks: Because ETFs bundle different investments into one package, they may not have the same potential return as an individual stock.

We’ll leave you with the words of the revered investor Warren Buffet, “Keep buying (ETFs) through thick and thin, and especially through thin.”

It’s too common for investors to feel that their investment solution is rather “vanilla”. The products and funds they are recommended, and in which they are invested, can all feel the same.

To some extent their unease is justified. Actively managed funds in South Africa often seem to have holdings that include excessive overlaps with one another. Take this analysis a small step further, by comparing their main holdings to the equity indices, and you’ll find that many actively managed funds also hold very similar shares to the benchmarks to which they are compared. It seems that there may be reduced appetite for distinction in the South African active management industry.

Now there are rigorous, experienced, clever, and bold people in the South African investment landscape, which begs the question, why are we seeing this aggregation – or flocking – around certain stocks, particularly those that are keystones to indices? Some theories would include words like ‘complacency’. Big funds have had great success as businesses attracting huge inflows. There may be an impulse to protect not just the business but the investment model that underpins it.

Other theories might include the word ‘timidity’. Perhaps fund managers have become timid, unwilling to voice their ideas of greatest conviction because of peer group anxiety. For all their faults, sheep know that there is always comfort and warmth in the flock or, in this case, the flock stock.

A third theory might include the word ‘dilution’. Where good ideas – great ideas – are being voiced, it is quite possible that they are ‘diluted’ by the requirements of managing large scale assets. Some really forward-thinking stock picks might just be unavailable to large funds because the market capitalisation of the stock in question is simply too small to move the needle as a percentage of a large fund. In such cases even a thirty percent appreciation in the stock does not warrant the time, effort, and expense of including it. Other stocks are traded in such small quantities that it would take months to achieve a meaningful stake.

The dominance of flock stocks in funds should not be taken as confirmation that this convention is necessarily ‘wise’, or indeed anything more than received wisdom and in some cases a symptom of systemic or product limitations. Nor should the ubiquity of flock stocks inspire us to give in the ghost and defer exclusively to passive, index-tracking funds as the go-to solution. It should, instead, inspire us to distinguish ourselves.

And those funds of distinction exist. Corion’s Prime Concentrated Equity Fund, for example, has created a space in which the tethers of system or product limitations have been lifted, and investment thinkers are asked to contribute their “ideas of greatest conviction.” Corion has then curated these picks into a fund with a limited number of stocks, backed by sincere, unfettered conviction. The diversification in this fund happens by way of asking several thinkers for their unfettered picks, which means harnessing the focus of more than one mind without diluting the spirit of the fund. The intent of the fund is clear.

It’s an example of the sort of thinking that can unlock real potential in parts of the JSE that often seem sidelined, unlock the thinking of investment experts that often appear muted, and creates a fund that brings the “x-factor animal” to a portfolio’s stable, harnessing the power of a truly active investment experience.

There is a place for the flock in investing. It’s warm. It’s safe. It’s often fit-for-purpose. But when the flock rules the jungle, well, then superior performance is muted whilst incurring higher fees.

*This content is brought to you by Corion Capital By David Bacher* David Bacher is the Chief Investment Officer of Corion Capital (an Authorised Financial Services Provider). Corion is driven by a desire to simplify the world of investing and manage a broad range of multi-strategy funds