Investing versus gambling.

These are volatile times and a lot of skeletons are tumbling out of closets. It is a time of reckoning for overconfident investors, fund managers and companies that laid big bets on a few assets or strategies and are now losing more money than they will be able to recoup for a long time, if at all. Just take a moment to mourn the Bitcoin bulls, the Steinhoff disciples, the Resilient ravers and the Brexit punters. If you invested heavily in any of those assets – or assets linked to them – you would have lost at least 50% of your investment over the past few months. Which means you would now have to earn a 100% return just to get back to where you were.


There may have been times these past years when you thought the wheels were turning very slowly for you and you were being left behind. Your neighbours may have bought Bitcoin and doubled their money within a few months; or your friend may have invested in a property syndication and received a 10% return per month. Meanwhile your money was invested in a balanced portfolio of shares, bonds, property and cash and you received a return of only 9,22% per year for the past 7 years. You may have thought that this was just not good enough.


But, what you need to keep in mind is that there are two very important advantages that come with this prudent approach to investing: namely beating the cost of living, or inflation; and being able to sleep at night. If we look at the returns generated by various asset classes over the last 7 years, we see the following:

SA General Equities


SA Resources


SA Industrials


SA Financials


SA Property




SA Bonds


Global General Equities


SA Inflation


So, if you invested R1 million 7 years ago, you would now have R1 854 023 in your balanced portfolio. R1 463 000 of this amount would cover only the increased price of goods and services caused by inflation, but you would still have a clean profit of R391 000. If you were very conservative and preferred to leave your money in a Money Market account, your clean profit would be only R70 673 and most of this would go to the taxman if not properly structured. The moral of the story is that you can generate proper returns without taking a lot of risk if you are a longer-term investor.


At the end of the day it is your mindset that will determine your financial well-being. Chances are that the person who bought Bitcoin or property syndications might have made it big the first time around, and even the second time – provided they got out in time – but their mindset is that of a gambler and we all know the casino always wins in the end.

We use cookies to improve your experience on our website. By continuing to browse, you agree to our use of cookies