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The cost of peace of mind

Jul 20 2010 00:00

In this issue of Collective Insight we seek to examine the concept of “peace of mind” in investing and, more specifically, to explore the trade-offs investors face when they select investment products designed to deliver what they believe “peace of mind” represents to them.

The cost of peace of mind

In the next issue…

Jul 20 2010 00:00

THE TOPIC for our next issue is: “Conflicts of interest – their impact on our investment world.” We want to examine what constitutes a conflict of interest in the investment world, what the implications are for investors and what can be done about them. Potential angles authors could address include:

The cost of peace of mind

The panic premium

Jul 20 2010 00:00

FEAR has a creeping, corrosive effect on investment returns. Angst-ridden investors pay explicit costs in the name of risk reduction (adviser fees, product margins), and succumb to self-defeating practices that carry implicit costs. Common causes of stress-related impact costs are over-insurance, excessive intermediation, the flight to quality and failure to properly discount longevity. Those factors affect all investors.

The cost of peace of mind

Fad or permanent feature?

Jul 20 2010 00:00

ABSOLUTE RETURN FUNDS first emerged in South Africa in the early 2000s. These products were introduced in response to investors’ renewed focus on downside risk and capital protection following the dot.com-induced market crisis that unfolded in the late Nineties. With assets under management now standing at over R106 billion, what was initially considered to be a fad by many appears to have stood the test of time.

The cost of peace of mind

What do hedge funds hedge?

Jul 20 2010 00:00

The definition of what a hedge fund is is still ambiguous, to say the least. South Africa’s Financial Services Board classifies a hedge fund as an investment in which the investor can lose more than what was invested. With that sort of misunderstanding it’s no wonder the word “hedge” fund remains perplexing in the eyes of many investors.

COLLECTIVE INSIGHT

The cost of peace of mind

A look at smoothed bonus portfolios

Jul 20 2010 00:00

OVER THE PAST two years retirement fund members have witnessed one of the most volatile investment periods in living history. No wonder many members are feeling unsure about their investment choices. How well then, might smoothed bonus funds address investor concerns about loss of capital?

The cost of peace of mind

Life-stage strategies

Jul 20 2010 00:00

According to the 2009 Sanlam Benchmark Survey, roughly half of the retirement funds surveyed offer member-level investment choice (MLIC). Of those, 65% to 75% have a life-stage option available. The bottom line is that at least one in four members currently invest in a life-stage strategy and that number is likely to grow.

The cost of peace of mind

Rest easy

Jul 20 2010 00:00

“DON’T GO SWIMMING until an hour after you eat.” “Eat your carrots – you’ll see better in the dark.” “If you go outside with wet hair you’ll get sick.” It’s my mother's voice exhorting me. It’s probably your mother's voice, too. Or maybe she told you “too much TV was bad for your eyes” or “clicking your knuckles causes arthritis”. Old wives’ tales are as old as language itself. They’re part of our oral tradition. Why do we hold on to such stories about our health when medical science advances ha

The cost of peace of mind

The cost of simplicity

Jul 20 2010 00:00

Many companies that still have defined benefit pension schemes are faced with the risks of a pension fund’s solvency levels dwindling through poor asset performance. It's for that reason that many trustees have found themselves considering a structured product that matches cash flow requirement of the fund over the next 15 years or so, eliminating that risk. My concern is that many trustees are underestimating the potential risks of these simple solutions.

Inside Collective Insight

Agents for change

"There are risks and costs to a programme of action." - John F Kennedy
The upside down food chain

TWO AMERICAN anthropologists released a scathing study of pension fund governance in 1992.
Goals-based investing

Behavioural finance teaches a great deal about the types of errors that investment practitioners ...
The Da Vinci Investors

SCIENCE has advanced more rapidly over the past century - and arguably contributed more to our li...
Torturing the statistics until they c...

ANYONE who has spent time reading economic journals will have come across people with PhDs who cr...
Beauty parades, betting and bubbles

PERHAPS Winston Churchill summed it up best when he said that he couldn't get his mind around eco...

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