Four remarkable young women, third-year students at the University of Cape Town (UCT), flew their campus’ flag high at this year’s 50th anniversary Johannesburg Stock Exchange (JSE) Investors Challenge by landing in second place for their portfolio-investment approach to managing shares on the stock market.
This group of three financial accounting students, Catherine Dunn (21), Courtney Baard (21), Shana Donson (20), along with Biology and Genetics student Natalie Langeveld (21), signed up to participate in the annual JSE Investment Challenge, in which schools and universities across the country competed in a virtual investing challenge.
“With more than 29 000 school and university students participating in the investment competition this year it came as a huge surprising honour that we placed second in the country in our ETF/ETN portfolio!” Dunn pointed out.
Teams made-up of up to four people were given R1 million “virtual money” to invest in the JSE. The challenge was opened to schools and universities, with different categories for investments.
University teams could either participate in a speculator portfolio buying individual shares, or the Exchange Traded Funds (ETFs) or Exchange Traded Notes (ETNs) buying baskets of shares.
JSE Limited is the biggest stock exchange in Africa, with a total capitalisation of $1,3 trillion, Dunn added, “and considering the exchange rate conversion to rands you can really quantify just how huge it is. As the 17th largest stock exchange in the world, it’s come a long way from its founding with the discovery of gold in Johannesburg that brought business activity and extraordinary development about in South Africa.”
She was researching investing, comparing SA with other countries, and she found her country to be “a nation of non-investors, and our poor savings rate and high debt-to-income ratio hindered economic development and growth.”
At the core of this, she found, was lack of financial literacy and knowledge of our citizens and, to encourage education. To this end, the JSE started its annual Investment Challenge 50 years ago.
Sponsored through a partnership with South Africa’s largest university society (InvestSoc) and the JSE, this was the only university team from the Western Cape .
Dunn explained the JSE sponsored R1 million in prize money and awards, “a big incentive and motivator to participate.”
The strategy
Describing their investment strategy, Dunn said: “Research, research, research! Our strategy was to keep a close eye on the movements in our investments every day while being knowledgeable about current affairs happening in the world and our country, which had a direct impact on the economy and the performance of our stocks.”
With a touch of luck, acting quickly to buy and sell when the team noticed significant movements “which entailed closing our eyes at times”, it all tied in extremely well with their studies at UCT, “putting the theory we learnt in class into practical and real-life scenarios.”
Furthermore, ETFs (Exchange Traded Funds) and ETNs (Exchange Traded Notes) are securities that track indexes (S&P500, MSCI World, FTSE 100), sectors (technology, mining), commodities (gold, silver, platinum, rhodium), resources and other assets.
Instead of buying a single stock, she continued, an ETF/ETN portfolio is a basket of many different stocks that lends to better exposure and a more diversified portfolio.
“Some of the ETFs in our portfolio were tracking-technology stocks, stocks from emerging markets, ESG companies, and so on. Instead of buying a single stock, one’s portfolio is diversified to include a bundle of shares in multiple companies.”
This is known, she said, as spreading one risk. “With shares you have concentrated risk. If your one share does badly, your entire portfolio could suffer losses.”
Throughout the competition, there was a leader board that teams could compare their portfolio growth against other teams in the country and respective provinces.
“Towards the final days of the competition, however, these leader boards were hidden further adding to the suspense and excitement of who the overall winners were. We do not have the exact growth [our portfolio reached] which also included interest income, but the winning team in the ETF/ETN challenge had a growth of more than 8% overall, which is remarkable for a passive portfolio.”
Cash prize
The prize money is put into an investment portfolio and gives participants the opportunity to put into practice what they have learned during the competition.
“It teaches discipline, patience and that investing needs to be a long term relationship with your money.
“We also learnt Dr Leila Fourie was only a few months into the job as CEO of the JSE when we experienced the market crash of March 2020 caused by the lockdowns from the Covid-19 pandemic. She successfully steered through this and kept the exchange on track, using her vast experience and educational qualifications.
When asked what investment advice their team might have for their fellow young generations with some savings, Dunn advocated: “Investing is not a get- rich-quick scheme and anything that advertises it to be is false information. Warren Buffett, known as a guru investor, says that investing is like watching paint dry.”
Her advice is to read widely, be sceptical when it sounds too good to be true, invest in what you understand and seek people and mentors out who have knowledge. “Always pay yourself first by putting away money first, and not after you have paid your expenses. Keep a tight rein on your expenses, start saving now for rainy days.”
Warren Buffet also said: “The best investment you can make is in yourself.”
