The Steinhoff disaster.

By now you should know all the disturbing facts about the collapse of Steinhoff, one of the biggest companies in South Africa and a major international players. Clients of JWR will not suffer material draw downs in their portfolios due to the fact that these are diversified across various asset classes and investment funds.

The real tragedy is, however, that we have once again been deceived by the management of a publicly listed company which we have trusted to do the right thing for their shareholders. We have already lost faith in our political leaders and now we are losing faith in our business leaders as well.

We can, however, learn a valuable lesson from this disaster and that is that one should never have too much money invested in any one specific asset. We have seen some shares go up a 1000% and usually we become complaisant about them, thinking that nothing can go wrong. We have also watched other financial assets like Bitcoin defy logic and tempt us to take part in the rise. But at JWR we continue to believe that diversification is the best way to prevent any unforeseen event from destroying one’s financial security. This diversification should not be limited to investment in shares only, but also to income-generating assets like the ability to work. It is of paramount importance to start saving a percentage of your income as early as possible to ensure the accumulation of a retirement fund which can supplement or replace your salary one day. It is equally important to take out disability insurance to protect your income stream.

Even a trusted investment like property can be highly risky. We have watched people invest in new property developments only to see their money disappear due to fraud (Sharemax), or to unexpected financial issues such as rising interest rates or even political turmoil. The answer seems to lie in achieving a good balance. Invest in some shares, in your education, in some property, in some cash, in some gold, and even in some Bitcoin if you want. But, before you do, have a well thought-out plan to manage your various investments and to make sure that you re-balance your portfolio from time to time.

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