I am writing this story with permission from the client in question.
I have been working with a client for almost a year now, planning out her retirement. It’s this year that she takes the plunge to live solely off the proceeds of her portfolio.
As is standard, I do a lot of research around the portfolio and portfolio holdings. We speak about income requirements and financial goals, and then match the portfolio asset allocation to fit these goals. Of course, we also take things like tax, estate duty, succession, risk cover, and anything else that comes up into account.
A part of this work involves accessing a central database that links an individual’s ID number to all their investments. We do this to ensure we have the full picture of an individual’s financial life and to make sure we aren’t missing anything.
Well, on pulling this statement for this particular client, I came across an investment that we weren’t aware of. It was with one of the Old Insurers and made many years ago.
My first instinct was that there was some kind of mistake. I called the insurer who sent me a statement showing the details of the investment.
I double-checked the ID number just to make sure it was my client. The numbers matched. This investment had been sitting ‘idle’ for 23 years. No withdrawals. All dividends reinvested.
R59,628 had been invested with the Insurer back in September 2001. It had been allocated to a standard South African Equity fund (with 70% exposed to the local market and 30% exposed to offshore assets).
It sat through the Global Financial Crisis, the commodity run between 2000 and 2008, the Zuma presidency, Obama, Trump, Biden, Ramaphoria, and Covid. The rand blew out from R6 to the USD in 2000 to about R19 to the USD today.
What do you think this investment is worth today?
R995,000. It’s basically a million. I calculated the compound return on this investment at 13% per annum over 23 years.
I wonder if, had the client watched the rise and fall of this investment, she would have acted differently.
Einstein called compound interest the eighth Wonder of the World. Looking at the statement, I find it fascinating to see this play out in practice.
It underscores the value of time in the market and allowing your investments to grow steadily over time. The market will always be volatile in the short term – the world was incredibly uncertain back in 2000, as it is today – but the longer-term averages play out.
Over time, markets move upwards and to the right (they go up).
Suffice to say my client is very happy. Her financial future is more certain with this discovery, and she can spend more time with her grandchildren, and not have to worry about her financial future.
She is going to be okay.
I wish everyone a joyous Easter break.