Listen to the show using this podcast player:

Duma Mxenge of Satrix* joined The Finance Ghost on this podcast to talk about a range of personal finance topics and emerging trends in investing. The discussion then evolved into an in-depth look at rent vs. buy and an unusual approach being taken by The Finance Ghost as he plans to buy a family home in 3 years.

It’s rent vs. buy as you haven’t heard it before, along with tons of other insights to get your head in the game in 2025.

This podcast was first published here.

*Satrix is a division of Sanlam Investment Management

Satrix Investments Pty Limited and Satrix Managers RF Pty Limited are authorised financial services providers. Nothing you have heard in this podcast should be construed as advice. Please do your own research and visit the Satrix website for more information on all their ETF products. This podcast was published on the Satrix website here.

Full transcript:

Introduction: This episode of Ghost Stories is brought to you by Satrix, the leading provider of index tracking solutions in South Africa and a proud partner of Ghost Mail. With no minimums and easy, low-cost access to local and global products via the SatrixNow online investment platform, everyone can own the market. Visit satrix.co.za for more information.

The Finance Ghost: Welcome to this episode of the Ghost Stories podcast. It’s a new year. We are actually quite deep in January now at the time of recording, it’s almost payday for a lot of people who feel like they were last paid about 5,000 years ago. And of course, the journey to financial freedom and just making better choices, you’ll really feel it in January. If you get to a point where you’ve got the right sort of savings number and everything else, then I can promise you that January does become a lot easier and it loses that Janu-worry joke that people like to make. But if you are in the middle of Janu-worry, then thank you for listening to this and hopefully you manage to reduce that pain next year. Listening to podcasts like these should definitely help you with that, just with some of that discipline and some of the techniques that get used.

I’m joined today on this podcast by Duma Mxenge, who is the Head of Business and Market Development at Satrix. Duma, we’ve done this before – in fact, we did this a year ago. I don’t know why Satrix always gives you the year kick-off job with me, but it’s awesome and you’re very good at it, so definitely no complaints!

Last year we talked planning for holidays, we talked financial advisors, we talked about living bonus to bonus. We talked about a lot of stuff. And this year we’ll do something a little bit different. Maybe we’ll touch on some of that as well. But let me welcome you to the show, welcome you to a new year. And thank you for doing this again with me.

Duma Mxenge: Thank you for having me again. I’m not sure from the team whether I’m the usher or the bouncer of the new year, but I’m quite excited to be here.

The Finance Ghost: Yeah, look, I love that. We’ll go with usher. We’ll go with – well, you can pick, actually, because the bouncers are generally quite big, ripped guys. I don’t know what your gym ambitions are this year. Maybe you’ve got some New Year’s resolutions around that. Do you want to be the usher or the bouncer? What’s the vibe?

Duma Mxenge: I guess it depends how 2024 was! I mean, if you’re well behaved, definitely you need to be ushered. If you’re not…bounced!

The Finance Ghost: There we go. You can do both jobs, that’s actually the point. It’s going to depend on the customer rather than you! I like it.

Duma Mxenge: 100%

The Finance Ghost: So look, before we get into some of the financial stuff going into 2025, how was 2024 for you in the markets? Did you find that you reached your goals? Did you have any big surprises or big disappointments with how it all played out?

Duma Mxenge: It was fairly interesting, I think. The interest rates going down or lowering definitely did give me a bit of a breather. In terms of sticking to my goals, definitely I did – there and thereabouts. But you know, what’s also quite challenging with the South African market and I’m sure maybe later on we’ll talk about it, is if you’re a house owner, the other thing that you need to think about is the inflation around your tax and rates as well as the levies and municipality, whether it’s electricity or water. So those are things that you don’t typically get to factor in. But it does help to have an emergency fund on the side to just make sure that you’re able to cushion those surprises.

The Finance Ghost: Yeah, I’ll never stop screaming from the rooftops that property is a lifestyle asset in South Africa and it’s something we’ll talk about today. It just is, and there’s nothing wrong with that. I just think people need to recognise it for what it is. I specifically mean residential property. I don’t mean listed property because that was actually my win last year. I was very happy to call that correctly. Listed property was the place to be. I guess at the time I felt it was obvious, although sometimes markets can really hurt you, but when interest rates are coming down, property and listed property is going to do well. That’s just literally how it works.

Tax-free savings account, Satrix Property ETF, thank you very much. I’ll earn tax-free dividends from a REIT. I’ll get all that CGT tax-free as well. That was the focus in my tax-free savings account last year and that was good for me. I’m renting the house I live in, but I’ve got lots of listed property investments. This just shows how you can alternate. You can be the usher or the bouncer, right? With your money, you can kind of react to what you need to do based on the role you need to play.

Duma Mxenge: No, and I mean just on that, if you look at the SA market, let’s say the All-Share, we pretty much did about 13%, 14% for the year. But to your point, depending on which sectors you got exposure to using ETFs – financials did well, industrials probably, a large majority of it would be your retail-type stocks as well as property. When you have an environment where interest rates are coming down, definitely those sectors tend to do quite well.

Bonds were actually quite a big performer last year if you look at it from an asset class point of view. It was a good year in SA, albeit if you look at it on an aggregated basis, it was more muted. You had to be in the right sectors to do well.

The Finance Ghost: Yeah, you did. Absolutely. Then as much as everyone is very excited about the JSE, the reality is that offshore beat it again – even in a year that was supposedly amazing for South Africa. It was my offshore stuff that way outperformed once more. We’ve got to always keep lifting our heads to the global opportunity set. I understand the familiarity bias of wanting to invest in companies where maybe you are their customer, you eat at these places or you bank with them or they are your cell phone provider or whatever else, whatever other example I can give. Retailers especially, I think people have this real affinity of hey, I do my shopping here, this must be a good business. And then they buy it at a valuation that’s too high or they don’t understand enough about investing and they lose 10% of their money and they can’t understand how on earth this is possible. I do my shopping there’s every week. My mom loves this place. How did this happen to me? Unfortunately, that’s investing.

Duma Mxenge: It’s home bias. I do encourage that, whatever you consume, you should be investing in it because it’s a lot more tangible. So I get people who prefer to stick to local stocks. But to your point, you’re quite right. You have to lift your head up and look at opportunities outside of SA. As a percentage of the global market, we’re like less than 1%, I stand to be corrected. But that being said, on the global equity side again, what drove the large majority of the performance was the tech stocks. Also, you needed to be in the US, so when we say global, I think specifically the US market did well. Emerging markets were a bit disappointing. We expected a lot from it. There was a big – I remember at the beginning of the year – there was a big song and dance in India. The Indian market over the period was also a little bit disappointing. Yes, double-digit but at the low levels. China with the stimulus did well and that was quite a big surprise when we look at it. Again to your point, when you’re looking at global market you need to also just make sure that you are well positioned from an exposure point of view.

The Finance Ghost: Yeah, absolutely. Most of us are sitting with a lot of emerging market risk in our daily lives, right? Our jobs, our sources of income, if you own a house. For me, diversification is not, hey, I’m very deep in South Africa, let me buy some stuff in China and completely ignore the US. You don’t need to treat your portfolio as a BRICS convention. You can actually go and invest in places like the US.

Duma, I actually want to tweak that point you made around investing in the things you use and consume. There’s a lot of truth in that. I think the tweak I would put on that is: use your consumption as part of your research. For example, if you asked me over the next five years – and this is something that I worry about in my own portfolio – over the next five years, who wins? Microsoft or Apple? I look at it and go: I cannot avoid using Microsoft products! It’s impossible. I can’t do it. Every single day of my life, there is no question, I’m using Microsoft all the time. But I don’t own an Apple product. I’m just one of those guys who can’t justify the cost. I don’t really use my phone for much more than the basics. Truthfully, I’m not really a techie person who gets turned on by the actual hardware. I really don’t. Apple for me is just expensive to have in my personal life. I’m not an Apple person.

Lots of people are Apple people and that’s fine. The point I’m trying to make is you can avoid Apple, you can’t avoid Microsoft. For me, Microsoft is business-to-business and Apple is business-to-consumer. One of those is much more defensive than the other.

The reality is that if Apple doesn’t come out with whatever the next smartphone is – and they want it to be the goggles, but is it going to happen? I’m not sure. I’m not convinced, honestly. So, over the next five years, I think that Microsoft beats Apple.

The challenge I’ve got is I desperately want to justify reducing my Apple exposure, but I’m worried that they do come out with some kind of incredible hardware. And then underneath all of that you’ve still got growth in their services business. You’ve got all the share buybacks that they always do.

The point I make is that your consumption should be one part of your due diligence. And then if you want to invest in single stocks, you’ve then got to do the work and you’ve got to learn how to do the work, right? You’ve got to learn how to do the research. And that’s where ETFs are very powerful. You’re taking a much more thematic play. In many ways, you’re just buying market risk, which over time the stats tell us you get rewarded for. Over a long enough time period, you get rewarded for taking equity risk. That’s how ETFs help you, specifically equity ETFs. There are other types like bonds etc. and you’ve raised that. That’s the beauty of ETFs.

I always advocate for both. Do ETFs as your core and then if you want to put in the work on single stocks, then do it, but don’t do single stocks flippantly. Don’t think it’s this easy thing where you just pick a few names and all goes well for you.

Duma Mxenge: No, no, no. You’re 100% right. And I think that’s the beauty of diversification, right, if you invest in ETFs. Just to your point again, Apple versus Microsoft, we are saying, well, why don’t you just hold both? Why don’t you hold Google, why don’t you hold Meta? If you believe in this whole premise around platform businesses are going to win going forward, we don’t know where this AI revolution is going and who the winners are going to be, but you want to make sure that you’ve got one of the winners. It’s going to be one of the big boys that are going to do exceptionally well in this space. Having exposure to technology, albeit expensive from a valuation point of view so they can’t afford to disappoint on the earnings, it’s been surprising us for a number of years now since this wave has started.

The Finance Ghost: Yeah, absolutely. It’s why I own Visa and MasterCard, by the way, because the payments ecosystem is so powerful, but I can’t choose between them. From the outside looking in, they almost do exactly the same thing. So why pick one? What happens if one of them gets accused of fraud or one of them has some crazy thing that happens at board level? I don’t want to take single stock risk when I can buy two things that are similar enough. It’s like making my own little ETF, it’s my own little payments ETF! It just only has Visa and MasterCard in it. So, yeah, I agree with that thinking and I guess that leads into – we’ve talked a lot about offshore and tech and everything else. I don’t want to wait too long in the podcast before we get to something that is quite close to your heart and something that you mentioned to me you want to talk about this year, which is some of the emerging trends in investing and specifically the concept of digital wealth.

Now, I’m terrified you’re about to tell me about meme coins and Trumpcoin and dare I say it, Fartcoin, which sounds like something my 4-year-old would 100% invest in if he understood that. But hopefully it’s not that. Maybe it’s a little bit of blockchain and bitcoin and actual assets as opposed to some of the meme stuff. Maybe it’s got nothing to do with that. I’m curious to hear what this digital wealth trend actually is?

Duma Mxenge: Yeah, so it does, but it doesn’t. But in the main, what we’ve started seeing now in the market, especially on the direct side, retail side, the personal advice, investment etc. is that more and more we’re getting a lot of clients who are extremely interested in investing. And there are a variety of platforms that are out there in order to assist clients. It’s not just a South African story. We’re seeing the same thing in Europe, we’re seeing the same thing in Asia. And it’s usually your younger market, trying to actually start the investment journey. Typically, what people tend to do is that if they’ve got a little bit of money, they’ll basically be digital-led or what we call product-led. You have a platform and you decide, you know what, I just want to use a platform, let me just invest. And typically, when people start off, especially the young generation, they get into crypto because they get so interested in terms of the returns and also just the hype around crypto and how that market has grown. Then as your portfolio grows, provided that you know you’ve done well, you start taking this concept of saying, hang on a minute, I may know a little bit more, this and that from an investment point of view, but I do need assistance.

So what we are seeing now is that there’s this migration where you actually have a hybrid model. It is digital, but also with a financial element attached to it, albeit automated. You get your robo-advice in the space or you can get, let’s call it “light-touch advice” that is provided to you in terms of how you need to think about your portfolio. Ultimately, where all this lands is your traditional financial advice business. What is quite interesting is that you’re getting a lot of practices that are saying look, I’ve got this long tail of clients that I can’t service. More and more they’re looking for a digital partner or platform to integrate into their practice in order to service that market up to a point where they get to a level where it becomes feasible them to actually support that business.

What is quite interesting as we look at the space is that it’s not a one-size-fits-all, so all clients are different. Personalisation is a big thing. Seamless transactions a big thing. Data-driven decision making is a massive thing in the space. You’ve got neo-brokers such as EasyEquities, you’ve got ourselves, basically we are a self-directed platform. You also got robo-advice and you also have telco guys coming to the space trying to figure out how they can tap into the retail market or mass retail market and provide a service specifically around investments. That’s, that’s the broad stroke.

But then I can also get into products. But I just wanted to position in that way, you know, to use that. It is a big trend in the emerging market as well as in the eastern part of Europe as well.

The Finance Ghost: Yeah, it’s super interesting. Thankfully a billion times more useful than meme coins, I’m very pleased to hear that, not that I doubted it for a moment! It’s really tech as a disruptor, right? We covered JPMorgan this past week in Magic Markets Premium and what’s quite interesting is comments made by management around their tech investment cycle. They’ve actually come out and said, hey, we’re now done with the modernisation investment and it’s been a multi-year, gazillion dollar thing, right? We’re now at the point where our tech teams can really turn their focus towards new product development, etc. That’s just a feature of the more institutional places like JPMorgan where they’ve been around forever. Some of the systems are very old and a lot of these startups, a lot of these disruptors see those gaps and say, look, we can’t fight – bluntly, we can’t fight JPMorgan, but what we can do – it’s how do you kill a Dragon? You’ve got to find its weak spot and then you just go for that weak spot. It’s like, okay, they’re a little bit slow here, their systems are old, let’s dive in, let’s go for it.

So much venture capital money is based around finding entrepreneurs or founders who have noticed that weak spot. They need money to attack it and they’re actually building the thing to eventually be acquired by said dragon. When that dragon is like, actually, this is really irritating now, I’d rather just get rid of you guys and buy you, that’s basically how venture capital works, right? It’s tech as a disruptor and it’s doing things, as you say, like servicing the long tail of a client base with more consistent advice. In some respects, they get a better outcome because maybe if it was a human doing it, they wouldn’t necessarily give it the attention it probably needs. It’s almost easier to write in a set of rules, take all the emotion out, and then focus on servicing clients where the value is high enough to justify some, shall we say, creative thought, which is both good and dangerous. Right?

Duma Mxenge: I do think that, whether you want to call it AI Agentic or AI agents, I think they definitely do have a role to play in the space. But I don’t think it’s actually on the conversion side. I think it’s once you’ve converted the client and have invested where you can now start asking questions, pointed questions about your portfolio. I think there’s still a role to be played in terms of human intervention when it comes to convincing a client, especially non-investment clients who are scared to make that final leap of actually investing. You actually need to have a human being saying you’re going to be alright, this is a safe investment, go ahead and invest in it. I think that’s a massive friction point that we haven’t gotten right. When I look globally in terms of how the other guys are also doing it, that piece unfortunately, you just cannot leapfrog. There’s a massive human element attached to it. I could be wrong. Maybe someone can come up with something super cute. But the sense I’m getting is that first-time investors do not want to deal with AI. They want to actually speak to a real human being.

The Finance Ghost: Interesting. That human connection still matters. I think a lot of what’s going to happen in the world over the next few years is finding the balance. That’s also why I’m quite bearish on this whole “goggles” kind of situation. I don’t know that most people want to live like that, actually. So we’ll have to see how it all plays out. It’s certainly going to be something to watch.

Duma, I want to make sure that we also talk about property because I think this is something that’s on the mind of all South Africans all the time. Let’s maybe move onto that, if that’s okay with you?

Interest rates have started coming down. The SARB guidance I’ve seen is for 50 to 75 basis points this year, roughly. Let’s see what happens. Obviously, we’re very much in a world of uncertainty, the SARB is strongly led by what the Fed does in the US we haven’t shown too much propensity to cut unless the US is cutting. We’ll have to see what happens there. Trump’s going to have an impact here, without a doubt.

That’s the question, right, is can South Africans who are looking at this saying, okay, you know, I’ve come through Covid, I’ve come through post-pandemic, I feel like my job is relatively stable, interest rates have come off – can they rely on more cuts or would you recommend that they still stress-test? Should they even be stress-testing for interest rate hikes from here? What approach would you take?

Duma Mxenge: Yeah, so I’ve been thinking about this question for quite some time. When you buy a property, it’s not the same as doing your research in terms of a company and looking at the valuation and buying it on a cheap. I say this because it’s a 20-year call. You may get it right for the next five years, but you’re going to get burnt going forward. You do need to do the stress-test and also be super conservative, base it on a high interest rates environment and say consistently at this level for the next 20 years, can I afford this house including the rates and everything? If the answer is yes, I think for me that’s a better call. If interest rates do come down, you can still maintain the mortgage amount that you’re paying towards your bond. You don’t need to go with the fluctuations of the interest rate. That’s a prudent approach, but you and I, we know that is probably the minority as opposed to the majority.

The majority always comes in at the wrong time, which is when interest rates are lowest and you’ve negotiated hard on your entry point. Ultimately when interest rates do go up and they will go up in the next 20 years, then people start feeling the pain when they have to tighten the belts, etc.

The Finance Ghost: Yeah, absolutely. I can actually share what I’m busy with at the moment if you want, in terms of planning around my own property journey. I’m still happily renting. It’s worked for me. I’ve had some big lifestyle changes, all very happy ones in the past year. I’m now looking ahead to saying, okay, my life is a lot more stable now. I can do a lot of planning and in three years’ time, which is mainly driven by age of kids and schools and stuff, I want to be able to live in a specific area in Cape Town. No, it’s not Clifton. It’s definitely not. It always irritates when people talk about  – let me just rant for two seconds – “Cape Town’s so expensive” and then they give an example of Camps Bay. Yes, shockingly, Camps Bay is expensive. So is the top of Los Angeles. Or maybe not so much anymore, but it’s just – anyway, there are lots of places you can live in Cape Town that are not Clifton. I’ll share it. My dream is there are a lot of really nice places in Durbanville. It feels a little bit to me like some old Joburg vibes. More established gardens, there’s less wind. I like that. It feels like Joburg by the sea, which is cool. That requires me to now plan towards this thing.

Obviously as an entrepreneur, getting a bond is not straightforward, so that’s an additional complication. You’ve got to really over-save on the deposits you’ll have, etc. But I sat down and did the maths – shock and horror – to say, okay, how much am I really losing out by not buying right now? Because Cape Town property growth is strong, right? It’s by far the best in the country. If you’re going to lose out, it’s going to be down here.

I went and worked it out based on a five-year view and assuming, okay, look, you buy a house and you sell it after five years because things change in people’s lives. Everyone wants to buy a house and live in it forever, but very few people actually do that. The costs of buying and selling are quite hectic etc. And in reality, the house I could buy right now I would probably grow out of in about five years’ time. That’s why I did it this way.

The maths tells me that versus renting and then saving the difference, house prices down here would need to grow by 7%, 7.5% a year just to break even, versus me doing what I’m doing now, which is renting. Obviously rental yields are much lower than interest rates and then saving the difference every single month. That’s what property would need to do.

It’s super interesting, right? Look, it obviously depends on your assumptions and rental escalations, but I’ve just re-signed my lease now. 5% escalation. I’m not sure my landlord is dealing with 5% inflation. I suspect that he’s not. I suspect that it’s worse than that. But obviously I pay my rent on time every month and I don’t make a noise. So here we are. 5% escalation.

Duma Mxenge: I’m just worried that your landlord is also a listener to your podcast!

The Finance Ghost: No, no, we have a good relationship. He knows he can take a risk on another tenant if he wants for an extra 100 basis points. I’m not sure it’s worth it.

But the other thing I’m doing now is I’ve looked at it and said, okay, so what would my bond probably be? And I’m now setting my budget to live to that bond even though I don’t have it. Basically I’m saying if I can’t save that amount every single month, the delta between the bond and the rental, in addition to all the other stuff I need to save, then clearly I can’t afford that house right now and I’ll be very glad I didn’t buy it.

I’m basically giving myself three years of living to the bond that I want to have, saving that excess so I have a much better deposit. And in reality, unless Cape Town house prices and specifically Durbanville do more than 7.5% a year, I’m going to be okay. I’m not worse off for not owning.

I know that was a lot to take in for someone listening to this podcast. Maybe go back and listen to it again. If you can, go and do – if your skillset lies in finance and you can do a bit of the modelling in Excel, go and do it. But even if it doesn’t, just maybe keep in mind, because I think this is a fair set of assumptions, house prices need to do upper-single digits before you are losing out by not owning a house. This assumption is, however, that you are investing the difference between what your bond would cost you, including the cost of owning a house, and your rent. And I think that is the trick that a lot of people don’t catch or they fall over – the behavioural finance element, right?

A bond focuses the mind. It’s very tempting if you’re renting to say, cool, I’m renting for – I’ll just use a number, it doesn’t matter what it is – 15 a month. I would be buying for 25 month. That sounds to me like I now have ten grand a month to go buy a new BMW or new Merc or, well, these days, I don’t know. Does that even get you a BM or a Merc? It’s been so crazy with inflation.

Duma Mxenge: Not at all!

The Finance Ghost: Itprobably doesn’t. Probably go buy like an entry level Golf…

Duma Mxenge: I’ll definitely go for a Chinese model.

The Finance Ghost: Yeah, 100%. Haval! But you go and like finance this new car for ten grand a month and the bank waves you through the door. Don’t go ask them for a mortgage, but by all means ask them for vehicle finance. And the reason is very simple. They’re going to charge you prime plus plenty on a vehicle. They’re going to have to charge you prime minus something on a bond.

That’s the thing to avoid. Don’t go – if you’re saving for a house, don’t go finance a car, rather look at it and save that difference and it will make all the difference to the rest of your life.

So for people who are thinking of do I buy a home now, etc. maybe just go back, listen to all of that again, see if you can live to the budget as though you already have the bond. And as long as you invest that differential, you’re not really losing out. Frankly, outside of Cape Town, I don’t think you’re losing out at all unless something really changes in the property market in places like Joburg or Durban or wherever you are.

Duma Mxenge: Right, yeah, I agree. I wanted to perhaps just test your thinking here just to understand where you’re looking to land. So typically what you find is that someone will rent, buy a house and rightfully so. That’s not your first house, you’re probably going to buy two more additional houses before you land on your dream house, which is super expensive when you go down that path. But people do that because they’re basing it on affordability at that point in time. So every five to seven years, they move from one house to the next. It’s a very expensive exercise, or it’s what you are describing where you basically defer it, stay rented. But the differential is what you invest. And then the call here is, what I’m trying to understand is, is it a three-year, five-year call, then you buy a house? Is that your dream house or the second house? Or do you, depending on, how long one needs to wait, is it that the longer you wait, the closer you are to your dream home where you ultimately want to land? Is that the thinking?

The Finance Ghost: It’s a great question. So my thesis is that the rate of change in your life slows down, right? I’m 36 now. I’ve lived a fairly full life. Things have gone well. Things haven’t always gone well. There’s been a lot of personal change, etc. But the point is that the rate of change slows down. You’re probably not – some people do, but you’re probably not going to have kids in your 40s. You know how many kids you have by then, chances are good, on average. Obviously, there’s always a laatlammetjie here and there. But most people have an idea of where they’re at by the time they get to that sort of age, whereas 20s and 30s, I mean, so much can change, right? You can buy a house in good faith and then get your dream job offer overseas. Now what? Or you meet someone, you haven’t met someone yet, you meet someone and in order for that relationship to work, you now have to move city. And you never thought you would do this, but you’re going to do it anyway.

I think there’s just – I bought the first place I ever stayed in because I did my articles at a bank. So you get this crazy good interest rate. I bought this little apartment because that was the sort of the, the lesson that you get taught by your family, right? Get on the property ladder, bricks and mortars, start paying it off, why pay someone else’s bond, etc. And maybe that was good advice once upon a time, I’m still not sure. I don’t think it’s good advice now. I did the math when I eventually sold that property, I think probably four years after I bought it. Unquestionably I was better off renting, there’s no doubt. I did the maths and I lost out by buying and I got it on a heavily discounted bond. It would have been even worse if I had paid full rate, not staff rate at a bank.

To go back to your question, my argument is if you defer it and you wait until it’s definitely a house that you can see yourself staying in, quite possibly forever, that is the “cheapest” way to buy a house for two reasons. (1) you’re saving a differential between renting and buying for much longer and if you save it properly, you’re getting that uptick. And (2), you’re unlikely to move again, you’re unlikely to have massive upheaval. You’ve chosen schools, you’ve kind of got a 12-year plan. No one in their 20s has a 12-year plan. They think they do, but it doesn’t ever work out that way, right? So that’s where I’m at.

And just also importantly, even if I buy in 3 years’ time, it’s still not a financial decision, it’s a lifestyle asset. I just don’t want to be at the whims of a landlord who can force me to move halfway through a school year or when it doesn’t suit me and then there’s a lack of availability. The Cape Town rental market is an extreme sport on a good day, so you’ve got to be careful with that. It’s still a lifestyle decision, but it feels like one that is then financially responsible as opposed to potentially something that will hurt me. I don’t know, each to their own with this stuff. I’ve thought about it a lot, as you can see, and that’s my approach, basically.

Duma Mxenge: No, no, no, I don’t disagree with your thinking. I think it’s a great way to look at it, but it’s not easy, with all the other external noise, family, friends, people are very pro-property. They may try to convince you otherwise. I think staying the course, once you’ve decided on a decision, I think that’s the best thing you can do.

The Finance Ghost: Yeah, absolutely. Then you’ve obviously got to invest the difference properly, and maybe let’s bring the podcast to a close by talking about some of that stuff, because as interest rates come down, the risk here – so what is the risk I face? The risk is that property prices actually go bananas. Interest rates come down, property prices go literally to the moon. Plus, if I’m investing with a relatively short-term view, I’m not necessarily putting that entire differential in equities that might get the uptick from interest rates coming down. A lot of it needs to sit in your more sort-of fixed deposit type stuff. A little bit of money market, making sure you’re not in a scenario where three years from now, in the year where it’s school-sensitive, that I need to be able to pull the trigger on this, I find myself in a terrible place in the market cycle with a 30% drawdown, that’s a disaster.

So the risk here is house prices go up much more than I think they will and I struggle to generate enough returns on the money that I’m investing. And that by the way, is part of why listed property for me is the hedge. I’m very happy to be in South African REITs because chances are quite good that if residential property goes up very hard, logically speaking, would the REITs not also do that? It just feels to me like there’s a good chance, right? The same things driving residential property would then drive the REITs. So I’m sitting with that exposure anyway. I’m earning dividends along the way and I’ve got a bit of a hedge built in there, so that’s some of the thinking and that’s where you need to have this coherent plan.

I’m definitely not blind to the fact that I’ve done a lot of this and I’ve done a lot of academic qualifications in this space. I don’t think this is the way the average person can run their money realistically. This is why people need financial advisors. This is why you need to speak to people who are very trained in this space. This is why you’re listening to this podcast, right? Because you want to learn. And that’s the win, is you come to a thing like this and you learn. Obviously this whole plan could backfire spectacularly and blow up in my face. That’s the risk in the market. But if you don’t take the risk, you don’t get rewarded, right?

Duma Mxenge: Yeah, no, that’s true. I mean, it also depends how active you want to be. Just going back to your point, the big thing that you first need to solve and agree with yourself on is the term. Anything less than three years, I wouldn’t advocate that you get into the equity market because it can be volatile in the short-term, but in the long-term it can definitely benefit. Anything longer than three years, maybe you will get that output surprise from a return perspective. But I mean, if you’re looking at, let’s say, anything from zero to three years or maybe 18 months, maybe let me push the boat out to three years, is that your money market is probably the best place to be. Your active income funds are also quite good instruments or investments or products that you can actually invest in. Ultimately what you’re looking for is that money that you put in it is “protected” but you are getting the upward interest rate uptake by being invested in such product of this nature. It is a safer, low-risk strategy as opposed to looking at equities. But someone who’s au fait with the market, deals with the market on a daily basis, then you can be super cute in terms of how you think about managing that portfolio or that emergency fund adequately in order to eke out more returns.

The Finance Ghost: Yeah, absolutely. You can do some interesting stuff. And I think it’s important to clarify: my plan is not, hey, I build up a REIT portfolio and I sell it in three years. Definitely not. The money that I’m looking ahead to needing for that house is in money market stuff because I don’t want to be forced into selling equities. That’s dangerous.

I use the South African REIT exposure as the hedge on my balance sheet. Say if I get this wrong and three years from now I’m sitting back going, man, I lost out by not owning. Actually, I haven’t, because in my tax-free savings account, which I’m making sure I max every year, I’m heavily into local REITs. I might have lost out on the physical asset and maybe I’m in trouble now in terms of buying – whoopsie, these things happen. But if I look at my balance sheet holistically, I’m still okay because I caught the property upswing with liquid assets.

It’s still very much a case of saving in money market and investing in equities, which is what you should be doing. Right? Maybe that’s a good place for us to actually bring the show to a close. We went down a huge rabbit hole with the property stuff. Sorry, Duma, actually, I almost feel a bit bad. We really spent half this podcast talking about property. But I think for South Africans, it’s a big question this year, right? It really is on everyone’s lips.

Duma Mxenge: It’s a huge question. I mean, even for those who’ve been in that for a number of years and those who are starting off, this is the first investment, which is a huge investment, big decision. I think it’s great to spend a lot of time just talking about property.

The Finance Ghost: It is, it is – and to actually just get some other views, also from younger people who aren’t necessarily tainted by the whole “property is always what you want to own” sort of generation. With greatest respect to them, there is an older generation who really believe bricks and mortar is life. It’s not necessarily true.

So, Duma, I think to bring this to a close, I’m going to ask you one more question and I want to get your expectation on what’s going to do better this year: local equities or offshore? And by offshore, I generally mean US, but as you mentioned earlier, there are others. You’re very welcome to throw something else in the hat here. What do you reckon it’s going to be? Is the JSE finally going to have its year in the sun this year versus offshore, or do you think that it might be another win for offshore?

Duma Mxenge: Maybe let’s start off with the local market. I think there’s definitely interest in terms of resources doing well this year. Just looking at the survey across all the other markets, the SA is coming up as one of those markets that will probably do well this year, whether it’s GNU, we will still wait and see, the lower interest rates. So there definitely are favourable tailwinds that may actually support the local market. I think there’s definitely great interest.

In terms of China, China versus the US, a lot of people are concerned about the valuations in the US. Like I said, I don’t think this is the time to actually go underweight or to be bearish on tech. It keeps on surprising us on the upside. Maybe in the US you need to be more exposed to technology. Then the stimulus in China is something that we need to keep an eye on. The Chinese are looking in other markets in order to hedge what might happen with the Trump regime, whether it’s going to be favourable or not. They’re not sitting on their hands and doing absolutely nothing. They are considering what other avenues can they look at in order to stimulate growth in terms of the Chinese market in other regions.

So it’s going to be quite interesting. It’s going to be very volatile, a lot of unknowns, but more and more we want to keep an eye and just make sure that we are in the right areas from an exposure point of view. And that’s what I’m looking at from my own personal portfolio as well. I don’t know about you in terms of, you know, what’s, what’s tickling your fancy at this point in time.

The Finance Ghost: I knew for damn sure you were going to throw that question back at me as I asked it. I was like, this one is coming straight back with interest. Look, I think some of the – I mean, it’s the old story in the US market, right? Some of the valuations are just daft. Look at Walmart and Costco. If you haven’t looked at those P/E multiples, then prepare yourself, brace yourselves for the pain.

I do think the tech – look at Netflix yesterday. So at time of recording, Netflix came out yesterday and after-hours it’s up around 14%, just absolutely shooting the lights out. I think these platform businesses have a growth runway that people underestimate. And I think some of the other businesses have a growth runway that people overestimate. So, for example, there’s no ways I’m buying Walmart and Costco at these valuations. There’s just no chance. I think the platform businesses can do a lot still, but they are really, really hot obviously.

I do think we’ll see a slower year. I don’t anticipate that this coming year in the US markets is going to beat last year. There’s just been some crazy returns. My banking shares did like 80% in the US in the past year. It’s extraordinary. I think it’s going to be a bit slower in the US than we’ve seen in recent years.

Does that mean the JSE will go faster? I think the risk is that a lot of the valuations have run ahead of earnings now and you’ve kind of seen a pretty bad start to the year in terms of just a cooling off really. There was a lot of sentiment-driven stuff last year and now we need the numbers to actually start coming through. And when the year kicks off with news of ArcelorMittal closing things down, etc. then I think people get a little bit of a reality check. I think the challenge for the JSE is that when the US does very well, the JSE can do quite well because it’s risk-on. And when the US does badly and people panic, then emerging markets get hit harder because now it’s risk-off.

So if people are taking their money out of Microsoft, you can be damn sure that most of them are taking their money out of emerging market funds even faster. I think that’s always the challenge for the JSE. I will say this, the sector that I think could be a relative surprise this coming year, not necessarily because I want to invest in it – I don’t hold any South African banking exposure and have no plans to change that – but I do wonder if South African banks might have a better year than the US counterparts. The US really had a crazy year last year with banking. It was all driven by non-interest revenue, which is the hard way to make money. It’s capital markets advisory stuff. With interest rates where they are, they are struggling. And look, if rates come down, the SA banks will also hurt a little bit. But I just think the opportunity for stimulus in South Africa from rates coming down is just higher. It really helps the average South African when rates come down.

That really does land in the banks because South Africans love borrowing money for things. If there’s one thing we just love doing, we want to borrow money and buy stuff. It’s our whole vibe. So that’s good news for local banks.

Yeah, I think there’s an outside chance that South African banks might – big “might” – outperform US banks over 12 months. I want to be very clear that’s over 12 months and that’s not how I’m positioned. I’m holding my US banking exposure because it’s a forever-and-ever play for me. But I think that might be one place where we do okay. Obviously, we’ll see how the year plays out, right? It’s going to be very interesting, as always.

Duma Mxenge: No, that makes sense. Just going back to our own biases. Because you started your career in banking, you understand banking more than any other industry. So that’s why it’s your forever. You’re able to know when to come in and out. We’re all like that, just going back to the biases.

The Finance Ghost: Yeah, but that’s why I avoid crypto. I don’t pretend to understand it because I’m not in tech. Honestly, that’s it, so you’re 100% right. There’s a lot to be said for sticking to your knitting. Just like if, if you’re good at a sport, play that sport. You don’t need to go and then hurt yourself trying to play golf. This is a very real example. You can see I’m sharing a personal pain here about golf.

Anyway, Duma, I think we’ve gone miles over time, but we’ve had a lot of fun and I think it’s been a great show. And to the listeners, I hope you’ve taken something from it. I hope that the house conversation landed. I know it’s complex and it’s an unusual way to think about it, but just try and think through it as rationally as you can, as much as it’s an emotional lifestyle thing.

Duma, thank you for all the chats around the market stuff as well, etc. It’s always good to know what you’re up to. We’ll definitely do another one of these this year. I wish you all the very best for 2025. Let’s hope it’s a good year for you, for Satrix, because obviously the beauty of it is you can go and express all these views in the market by buying Satrix ETFs. You can do it in your tax-free savings account and it’s just a really good way to buy market exposure. There’s a huge range of them. You can go and really tilt your portfolio in whichever direction you want using those Satrix ETFs, so go and have a look at that. Duma, thank you. I look forward to another year of making some great podcasts with the team on that side.

Duma Mxenge: No, thanks, thanks for opportunity and great chat. I always look forward to these discussions. They’re quite thought provoking, so I’ve also learned a thing or two. Thank you for your time and thank you for inviting me to this platform.

The Finance Ghost: It’s a great pleasure and likewise. Thanks Duma. We’ll chat again. Ciao.

Satrix Investments Pty Ltd and Satrix Managers RF Pty Ltd. are authorised financial services providers. Nothing you have heard in this podcast should be construed as advice. Please do your own research and visit the Satrix website for more information on all their ETF products.