How high is your (financial) fever?

By Andró Griessel

Find out what your investments’ internal rate of return is

I am sure that lately you, just like me, have taken your fever more frequently than you ever will. Whether you are afraid of Covid-19 or think it is a farce, is irrelevant. The point is regulations force you to have this health check done regularly.

However, in financial planning and more specifically when it comes to your ability to retire, there is no one forcing you to do your financial health test. I often notice that even the “doctor” who has to look after you, never takes your financial “fever.” I will get back to this, but let’s just finish with Covid-19.

See an updated version of the graph of the “Covid-19 market crash” below that I have also published in April 2020.

The JSE is currently still trading around 3% lower than when the whole affair began, but 45 days after the trouble started, roughly 35% of the value of your JSE investment (as well as investments in other stock exchanges, in their own currencies) has been wiped out. What has happened since?

Since the lowest point on 23 March 2020, the respective indices have delivered the following returns (all in rand terms):

  • SA Equities= 52%
  • Emerging Markets Equities= 46%
  • Offshore Equities= 36%
  • SA Bonds= 28%
  • SA Listed Property= 25%
  • Offshore Property= 23%
  • SA Cash= 3.5%
  • Offshore Bonds= 3%
  • Offshore Cash= -9%

When we look at data from the Association of Savings and Investments South Africa (ASISA) regarding the flow of funds in the second quarter of this year – in other words from 1 April to 30 June – it looks as if investors have shot themselves in the foot yet again.

See the table below that shows the main flows per fund category. I have taken the largest fund (in other words one which most likely affects most investors in some way or the other) from each category and shown its return since 23 March (the bottom of the crash) up until now.

The red shows where investors sold and the green shows where investors bought.

R7.8 billion has flowed out of high-equity balanced funds and pure South African Equity funds and a large portion thereof has ended up in the SA Multi-Asset Income, SA Cash and SA Short-Term Interest-Bearing categories. The wealth destruction effect, or at least the missed opportunity to buy assets at very low prices, has once again been massive.

Back to measuring your fever.

Only when you calculate an internal rate of return on your investments will you know whether you have the financial version of a potentially deadly virus. In practice, I notice that very few people who come knocking on our door have the slightest clue about the following:

  • What the internal rate of return on their investments is;
  • How it compares to given benchmarks;
  • How it compares to the assumptions that have been used when planning for their retirement; and
  • How the funds that they have been invested in compare to their peers.

This bizarre behaviour is the equivalent of going on a long trip by foot without ever looking at your map and not knowing whether you have enough food and water to reach your destination. The behaviour that I have mentioned above also leads to investors’ actual returns (from their investment activities) being considerably lower than what the underlying investments have achieved over time.

What is an internal rate of return? It is the actual return (after fees) that you as an investor have realised on the premiums that you have paid. In other words, it is not what is on the label, but what is actually inside the can.

Other than your fever during a pandemic, there is a lack of urgency when it comes to investors checking the return on their investments and determining whether they are on the right track. And unlike the pandemic, the probability of an undesirable outcome for you personally (i.e. that you have not made enough provision) is much higher.

Do yourself a favour and determine the internal rate of return on your investments as soon as possible. There will most likely be an unpleasant surprise waiting for you, especially for those of you who are invested in policy- or insurance type products.

If you are one of those people who, in a moment of panic during the crisis, have moved your funds around (to so-called “safer” investments), knock on the door of a professional adviser for some help and perspective. This type of behaviour has a destructive effect on your long-term wealth. The other side of the coin is that many people run after historic performance without fully understanding the potential outcome going forward. This behaviour is also most likely to lead to the same adverse outcome.

Andró Griessel is a certified financial planner and director of ProVérte Wealth and Risk Management. Contact him at

Although all possible care was taken in the drafting of this document, the factual correctness of the information contained herein cannot be guaranteed. This document does not constitute advice and anyone planning on taking any financial action based on this document, is strongly advised to first consult with their personal financial advisor. Woodland Wealth is an authorised financial service provider with FSP no. 5966.


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