The retired investor

Malcolm Stewart - QSAM
Many retirees and their investment advisors overlook the risks that may face them. Often their advisors live in JHB and have looked after them for years. They may not however be the right horses for the new courses. It is sometimes also the case of "out of sight, out of mind." They forget that you cannot replace these assets. You do not have a long term view, you cannot ride out a bear market and you always need income.
Offshore investing became a feeding frenzy when the Rand was collapsing. South African investors had never had the opportunity to invest offshore. The timing was unfortunate, for as the Rand collapsed so the World's Stockmarkets were reaching the final stages of a 10 year boom. Product salesmen had an easy time selling the offshore product.
The fundamental question of risk was not considered. A retiree should have a very low risk level, why expose him or her to a currency risk? The second fundamental that was ignored was the value levels of the world's markets. P/E ratios of over 100 were recorded on the NASDAQ.
Currently the biggest problem facing pensioners is 'Income Risk'. As interest rates decline so your income will come down. Less than 7 months ago you got 14% on your cash deposits, you will be lucky to get 7% by Xmas. This is a massive risk as your cost of living is rising while your income will have dropped by almost 50%. Interest rates are not likely to rise substantially in the foreseeable future while prices will always rise. I have called this the PENSIONERS' TRAP!
Instruments that fix your income are still available through the insurance companies or through direct bond or property trust investments. Some investment houses are focusing on instruments, which will generate steady or rising income streams. Pensioners must do their homework and find them. You must also be warned that it was in this climate when pensioners were desperate for income that the Masterbond fiasco took place. Remember the higher the yield, the higher the risk.
Overall my advice would be to consider a venture into equities. Do your buying now but stay within the correct risk profile.