Senior Stan heeded our call for retiree stories, by sharing an in-depth account of his past 50 years in money.

This week, we’ll start with the lessons he learned during his working years, which prepared him for a prosperous retirement.

Lesson 1: Be curious, learn from others, educate yourself

In his 20s, Stan had two friends who had a significant impact on his investment journey. They were a work colleague a few years his senior and a retired businessman who traded on the stock market.

The work colleague was under the guidance of his father, who was an experienced share investor. Their regularly discussions about what to buy and when, were instrumental. “Fortunately for us, the JSE was much bigger and the commodity boom was in full swing. Having a background in IT made me naturally interested in share market indicators, which we followed with trading software that we developed ourselves. At that time, an investor with access to up-to-date information was at a great advantage.”

Stan’s first stockbroking account was with a company called Menell, Jack Hyman, Rosenberg & Co. His core portfolio included SA Breweries, Barlows, Anglo American, Nedbank, FirstRand and some retailers.

Here he believes that if you have the time to devote to finding good quality companies, these investments should be for the long-term. “These are basically bottom drawer investments that you check on once a year just to see whether anything major has occurred that’s affecting the industry or company as a whole.”

Lesson 2: Invest consistently – during the good and bad times

To diversify his holdings Stan invested in the Sage Unit Trust fund, the Old Mutual Investors Fund, and in subsequent years, various Investec funds.

“If you are young and starting out, you have many decades ahead of you, so choose 1 – 3 broad-based equity ETF/unit trust funds and invest consistently even through the dips. Consider whether you intend to live in SA long term and adjust your international exposure accordingly – and don’t forget that emergency fund. Also consider whether an RA is appropriate should you wish to emigrate.”

Lesson 3: Have the basics in place

He also stressed the importance of having the basics in place throughout your working life. This should include income replacement and life cover policies and an emergency fund. And of course using your TFSA to its maximum should now also be part of your basic financial planning.

“I want to share an example of what a small premium invested over a long period could potentially yield. In 1977 a sales rep convinced me to invest in an endowment for just R30pm. This had accidental death cover and a diminishing life cover, so only a portion was invested in the endowment itself. I didn’t want the small debit order going through my account each month and opted for a yearly premium which was reduced to R316 pa. I did not even notice this payment going through my account each year. This policy matured in 2019 some 42yrs later, giving me a tidy sum of R797,972. A return of just under 15% pa!

Lesson 4: Don’t keep up with the Joneses

Stan made a conscious decision in his early working life not to buy residential property but to rather invest, and rent until much later in life. “I understood early on in my investment journey that residential property is a lifestyle asset and should not be treated as an investment asset. I cannot stress enough how much this strategy has paid off.”

With this same mindset he bought good second-hand vehicles. Much later in life he was able to buy new vehicles with cash, which meant that he could avoid the substantial interest repayments. “All this is only possible if you do not succumb to peer or family pressure.”

Lesson 5: Don’t assume your savings are on track

Over the years, Stan has encountered many people who believed that their company pension fund would provide adequate savings.  “This may have been fine, had they stayed the full term of 30+ years with the company – but nobody did.” And those who left didn’t preserve their pensions or invest in a retirement annuity outside their work pension.” Today, they are severely cash-strapped and financially dependent on their children.

The same lesson applies to financial advice: Don’t assume your financial advisor has you covered. “I remember having a discussion with a family member many years ago and his response was that his advisor had him covered. He added that he had nothing to worry about and neither should I. Fast forward to age 65 and he discovered to his horror how inadequate his pension was going to be. He currently relies on handouts from his children to survive.”

This brings us back to the first lesson: Educate yourself, and keep a close eye on the growth of your investments. “This is the best advice I can give. Educating yourself will also prepare you to ask the right questions if you do use a financial advisor.”

In our next post, Senior Stan outlines his retirement product allocation, and shares some thoughts on fees, tax and his income provision strategy.

Saving for retirement is the biggest investment most of us will ever make. Sadly, it can also be very complicated. In this monthly blog, Carina Jooste responds to common retirement questions, ranging from which products are best suited to different circumstances to efficient tax treatments.