I’m about to make R1 million at 34!

[gracer]

@alfiano I am shorting the rand. And I'm only investing in USD ETFs. I've been doing it for years and it's worked extremely well. Rand devaluation has been 7% annualised the last 15 years. Add that to S&P and VTI dollar growth thats been about 10% annualised then you'll get your total return for every rand converted to dollar stock. I've been in the market for around 7-8 years and was fortunate to capitalise on much of this growth.

I have a high respect for your posts, so do correct me if I'm wrong in my thinking.

Edit: I remember your post about the enduring myth of rand devaluation. I'm assuming your thought process is linked to this?

 

[alfiano]

@gracer Your strategy has worked extremely well because the US has happened to overperform - as you say, (highly) fortunate. The US has underperformed in 5 out of the last 7 decades. Anyway, past performance is not equal to future performance.

Yes, it is related to my post on the rand and I’d encourage you to give it another read.

In real terms the rand has devalued by approx 1.5%pa over 15 years but there is little reason to expect this to continue indefinitely. ZAR nominal returns should always be higher because we have higher inflation.

Right now, South African equities have higher (real & nominal) expected returns than US equities as they are riskier.

Does a USD-denominated ETF investing in SA return more because it’s USD-denominated? The answer is of course not. Is an investment in eg. SATop40 bad because revenues are mostly rands? No.
Of course we should seek diversification in our investing between markets and currencies, but that is a whole portfolio critique rather than an individual investment critique.

Expecting S&P500/VTI returns from past 15 years to continue indefinitely is not consistent with underlying valuations and over a century of data.
But I will say that yes, theoretically 18% nominal ZAR returns are quite possible in this interest rate environment (but that would be on the high side, 12-15%pa I think is more reasonable), apologies I was thinking in real terms.

Hope the above is understandable, I was lacking clarity of thought while writing.

 

[gracer]

@alfiano Great comment. Thanks for the insight.