Roberto CoelhoBy Roberto Coelho|June 28, 2022|7 Minutes|In Opinion


"Five ways to investment success in 2022."

David Shapiro is the uncrowned king of the Johannesburg Stock Exchange- Africa’s biggest bourse. He has spent half a century suffering the slings and arrows of outrageous financial fortune and these precious five tips on investing are the fruit of his experience.

When David Shapiro entered the world of international stock markets in 1972, he had little idea of the severe market crashes he would live through in the next halfcentury. The only major market crash he missed was the Wall Street meltdown of 1929 that triggered the great depression.

He’s seen them all from 1987, Black Monday, where the Dow Jones plunged 22%, the single biggest decline in history; to the bursting of the Dot-Com bubble, in 2001, when the NASDAQ composite fell 76%.

Then, the financial crisis of 2008, better known as the Great-Recession, causing the collapse of Lehman Brothers along with several other financial institutions. The Dow Jones fell 54% from its peak.

Most recently, the 2020 Coronavirus crash, where the Dow tumbled 9.99% on March 12, the biggest single day move since the crash of 1987; it would fall another 30% as the world spiraled into pandemic panic.

These financial catastrophes leave traders on edge. More so Shapiro because he is a long-term investor; a wrong decision in a split second, in the depths of a crisis, can destroy a 20-year portfolio.

Shapiro survived it all and shared with Billionaire Tomorrow five of the most precious lessons learned. – they may seem simple, but they are not easy to apply and require patience.

Lesson one: be wary of the financial boogie man; inflation.

“From 1972 to 1980, I saw very wealthy families taken away,” says Shapiro.

Towards the end of the 1970s, inflation spiked for several reasons including an out-of-control oil price, a lack of fiscal prudence and poor monetary policy. This led to an inflation rate of 14% in the USA in 1980.

“We must constantly make sure we’re ahead of the purchasing power of money.”

When inflation rises to such levels, personal wealth must grow at a faster rate. If not, wealth is being destroyed.

“Don’t preserve capital, grow capital,” warns Shapiro.

Lesson two: Focus on yourself.

In a world of smartphones we are all bombarded with the latest craze, the latest panic.

Sure, it is important to stay in touch, but panic can mean bad decisions that damage your wealth.

“I don’t worry about the rich and famous. I worry about myself,” says Shapiro.

By shutting out the noise and focusing on long term wealth creation, one will make correct decisions, he says.

Lesson three: The only constant in life is change.

Predictions about the future are usually wrong. In 2005, one may have predicted in 2015 Nokia would still be the world’s largest cellphone producer. Think again – you should have invested in Apple instead of Nokia back in 2005.

“This is the big challenge, what changes will occur in the way we live and conduct ourselves in the next 10 years. What kind of world will we live in with 5G and electric cars?”

Shapiro believes we must look to the future, not the past, for good investment opportunities.

You have to spot trends but once identified ,translating this into a profitable investment is the next step.

Lesson four: The inflection point; management!

“South Africa has a high-class business-person.”

Shapiro uses several examples to reinforce his statement, referencing the world class banking sector and expertly run retailers.

Over the long term, many of these firms, together with other well-runSouth African businesses,were picture perfect investments.

Many South African management teams are strong stewards of capital, he says.

Others fell by the wayside: Steinhoff, Tongaat, and EOH.

Each of these businesses can trace their missteps directly to management.

“The lesson here is you have to learn the management. EOH is a good example everything was ‘to good to be true’ and it was.”

Understanding and evaluating management is a key step to follow before making an investment.

Management will make or break an investment.

Lesson five : Rome wasn’t built in a day.

In the fast paced twentieth century world it’s easy to forget there is an option to wait before investing. To be patient and watch what unfolds; Bitcoin is a perfect example.

The cryptocurrency is not a teenager yet, however thousands have poured their life savings into it.

“You don’t need to go in tomorrow, give it time,” says Shapiro.

“Evaluate the outcomes of potential regulation, increasing security and decreasing volatility, before diving into it.”

Shapiro uses a metaphorical bank manager to elaborate: “I want my bank manager to be conservative, I don’t want him to pay school fees with my savings.”

If one wants their bank manager not to waste theirhard-earned money, shouldn’t the investment philosophy be the same?

Before rushing into the next ‘big thing’, take a breath and sleep on it. Evaluate the risks,do not fear missing the opportunity, there will be another chance in the future.

As Richard Branson says: “Opportunities are like buses; there’s always another one coming.”

Once the opportunity is evaluated, take the risk and earn the reward.

This is the essence of wealth creationand all part of the Shapiro Mindset that has seen him weather the financial storms of the last 50 years.

Tips for investors in 2022 – go for it.