It’s a big week, as evidenced by the Rand hovering just above a 13-month low to the Dollar. And everyone’s eyes are on the US Federal Reserve and SA Reserve Bank as we expect them to announce the first interest rate cuts since Coivd. 

Off the back of SA’s CPI dropping to 4.6% in August, we expect the SARB to cut interest rates by at least 25 basis points to 8%, after maintaining it at a 15-year high of 8.25%.

But with all that market optimism, it's easy to make mistakes.

Here are two things to do before rate cuts, to ensure you build wealth in SA…

Shining some light on 🔦 

• 2 Investment must-dos before interest rate cuts.

• SA’s new banks, BTC’s $60k flirts & affordable Google.

• Stock update: Higgo’s Top 10 stock picks for 2024

• Earnings calendar: Who’s reporting on revenue, when

• Saving VS investing: what’s best for you?

THE SPOTLIGHT

Rate Cuts: 2 Things You Need to WIN

It’s exciting times all around this week as both the US and South Africa are expected to cut interest rates, which means lower repayments on loans (homes, debt) and more liquidity in the markets, priming optimism and growth.

And we’re only hours away…

The US Federal Reserve’s Open Market Committee is expected to announce the first US rate cut in 4 years by 20:00 tonight (Wednesday 18 Sept) – and it seems to be just a question of whether it’ll be a 50 bps cut or 25 bps, with potentially more cuts on the horizon.

In South Africa, the rate decision is expected at around 15:00 tomorrow (Thursday 19 Sept), and it has similar 25bps to 50bps expectations.

What It Means For You

This will be SA’s first rate cut in 4 years and, generally, it presents a golden opportunity to capitalise on growth and increased liquidity.

But how do you get the maximum benefit for such a once-every-so-often occurrence?

We’re breaking it down into two key strategic moves to help you build for the future right now…

1. Know Your Risk Profile

Rate cuts increase market optimism, but investing without knowing your risk tolerance can lead to hasty and potentially costly decisions. 

Your risk profile determines how much risk you're comfortable with and how much you can realistically take on, based on your actual financial situation, long-term goals, and personality.

If you want to make smart, future-proof investments, knowing where you stand on the risk spectrum is vital.

Discover yours for free right now: FinMeUp has built a tool specifically designed to help determine your risk profile. It’s fast, easy, with an element of fun and it costs you nothing – get your risk profile with Finimals right now.

2. Focus on Your Key Investment Goal(s)

Investing without a clear goal is like driving without a destination – you might move, but you won’t get anywhere meaningful. 

Here’s why goal-focused investing is essential:

• It gives you clarity and focus: Having a specific financial target (whether it’s retirement, buying a home, or building wealth) helps you filter out distractions and stay focused.

• It helps you measure your progress: A clear goal allows you to track progress and adjust your strategy if needed. For example, if your goal is long-term wealth, a temporary market dip is less of a concern than missing your contribution targets.

• It means you’re strategy-driven, not emotional: Goals act as a safety net to prevent emotional decision-making. If you know your goal and have a strategy to achieve it, you're less likely to make rash moves during periods of volatility.

Set, track and manage your investment goal: We’ve also built a remarkable tool that helps you keep focused and strategic, for more goal-focused wealth-building – use the Goals tool to get the max out of your investments.

Note: This is not financial advice; it is merely observations. For personalised financial advice, you can book to speak to a financial advisor here (powered by a registered FSP: No. 51310).

STOCKS AND ALL

🏦 Battle of the Banks: As Discovery Bank hits 1 million customers, TymeBank attracts major investment and Capitec leads in users with 23 million customers, Old Mutual announced it’s preparing to launch a new bank by the end of 2024. It’ll be joined by Postbank, the Young Women in Business Network (YWBN), and SA Innovative Financial Services Cooperative (SAIFSC), all preparing to take on SA’s traditional Big 4.

📈 Karooooo's Growth Surge: IoT and SaaS company Karooooo reported a 15% revenue increase in Q1 FY2025, with 80% of its income from South Africa. Its Cartrack platform drives growth, especially in Southeast Asia, which saw a 24% surge in FY2024. Shares are up 62% year-to-date, making it a strong contender for investors in emerging markets.

🪙 Bitcoin Flirts with $60K as Fed Decision Nears: Bitcoin briefly hit $60K but slid below again this week as traders brace for the Fed's rate decision this week. A 0.25% or 0.5% cut could drive crypto volatility, with BTC increasingly tied to macro trends.

📉 Alphabet Drops 18%, a Bargain?: Alphabet (GOOG) shares have fallen 18% to $159. With a forward P/E of 18.3 and growth potential in digital ads and cloud computing, it’s seen by some as a bargain despite AI and regulatory risks.

🚀 PDD Holdings Faces US Scrutiny Amid Growth: PDD Holdings (PDD) stock dropped 2.4% following news that the Biden administration plans to restrict a trade exemption that benefits Chinese firms like Temu. Despite this, PDD reported an 86% revenue increase in Q2 2024, driven by its growth in e-commerce and agriculture. Analysts maintain a bullish outlook, with a price target suggesting a 79% upside.

WEALTH HACKER’S KIT

Saving vs. Investing: What’s Best for You?

From childhood, we’re taught to save – whether it’s in a bank account or a piggy bank. But what if investing was the smarter option?

At the heart of the matter is this: how hard is your money working for you? If growth is not outpacing inflation, you’re effectively losing purchasing power as life gets more expensive. 

What’s the Difference?

Though often confused, saving and investing are not the same. 

Savings typically sit in low-risk cash assets (like bank accounts), while investing exposes your money to higher-risk assets with the potential for greater returns. 

As the old saying goes, higher risk often means higher reward.

The 2022 example below from Onemint highlights how different asset classes offer varying returns:

Risk vs. Return in South Africa: Practical Examples

As you can see, leaving your money in a bank earning 6.22% means you’re actually 0.98% poorer by the end of the year, thanks to inflation. 

The more risk you take by moving into higher-risk asset classes, the better your return after inflation.

Making Your Money Work Harder: The Rule of 72

An easy way to calculate how effectively a vehicle will put your money to use is with the Rule of 72: For example, if the Fairtree Equity Fund has returned 13.94% annually over the past 10 years, dividing 72 by 13.94 gives you 5.16 – the number of years it takes to double your investment.

Want to know how long it will take to triple your money? The Rule of 114 works the same way – just divide 114 by your rate of return!

But It's All About Your Personal Goals

That said, there are of course circumstances where saving is preferable to investing: When you have short-term goals or are building up an emergency fund, you don’t want those locked away, they need to be accessible.

Similarly, different people have different risk profiles and appetites and might need to bank on slower-growing vehicles that offer more security – the same goes for when the market is in turmoil.

So how do you know what’s best for you?

Again, you start by:

• Determining your personal risk profile – do it for free right here.

• Let your financial goals guide you – set and track your goals with this handy tool.

THE PEOPLE HAVE SPOKEN

We asked how you’d react to an interest rate cut, and most look forward to winning in the stock market…

🟨🟨🟨🟨🟨⬜️ 💸 Saving more – I’ll put the extra cash from lower repayments into my investment fund! (37%)

🟨🟨⬜️⬜️⬜️⬜️ 🏡 Go property hunting – Time to explore the real estate market with cheaper bonds. (16%)

🟩🟩🟩🟩🟩🟩 📈 Stock market dive – Cheaper borrowing could boost stocks, and I’m in!  (42%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🤔 Waiting it out – I’m still watching the markets to see how things unfold. (5%)

What you said…

Nice one, Asethemane. Building a cushion for emergencies means you can better weather most any future storms. 😎

THE UPDATE