Financial Institutions and Markets (J)



During periods of underperformance, even the most experienced investors get tempted to switch funds in search of better returns. However, switching funds in response to short-term market conditions can jinx your investment success over the long term. Mthobisi Mthimkhulu explains.

After a flat few years, 2018 was particularly difficult for local investors in South Africa, with the FTSE/JSE All Share Index returning -8.5%. To add to the woe, price declines in other asset classes contributed to overall negative performance.

During these periods, like many other investors, you may get tempted to switch out of a fund that is doing poorly and buy into another fund that is doing relatively better. While this may appear to be a sensible way to protect your investment, or generate better returns, switching funds during poor performance inevitably destroys the value of your investment. This is because, in order to switch, you have to sell your units, which often locks in the underperformance of the fund you are switching out of. At the same time, the fund that you switch to may not be positioned to repeat its good performance of the past in the future. In effect, by switching you are often selling and buying at exactly the wrong time.

Switching could also cost you in fees and taxes. As switching involves the sale of an asset, the transaction could trigger capital gains tax. In addition, the fund you are switching to may charge initial fees.

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Author: Marcy Kempf

A busy day for the Securities and Exchange Commission (SEC). The open meeting held on June 28, 2018, resulted in votes on several final rules and rule proposals that had been noted as priorities and publicly discussed in recent speeches from SEC staff. Among other things, two significant items — exchange-traded fund (ETF) exemptive orders and amendments to Rule 22e-4, better known as the Liquidity Rule — were both impacted by the day’s work.

Read more: Exchange-Traded Funds and Investment Company Liquidity Disclosures Addressed in Recent SEC Actions

Author: Evan Fox, J.D., LL.M.

Hi there and welcome to CryptoLogic, Berdon’s new blog-ish focused on tax, and other, issues related to the digital/crypto asset space! As these writings progress over the upcoming weeks and months, I hope to do a deep dive into some seriously complex and unsettled tax issues, as well as the technical aspects of digital assets. However, as this is the “kick off special,” a brief introduction into the space would probably be helpful for the uninitiated.

In 2009, the Bitcoin blockchain was launched and was intended to serve as a peer-to-peer digital payment system. Its creator, the still unidentified Satoshi Nakamoto, came up with a computer linked system whereby parties around the world could conduct and record transactions without an intermediary. In the Bitcoin ecosystem, the Bitcoin is the native crypto asset on the Bitcoin blockchain. All blockchains use their own native crypto assets or require use of major ones, such as Bitcoin or Ether (which is the native asset of the Ethereum blockchain). These crypto assets are necessary to the functionality of a blockchain system; they are the incentive mechanism for computers in the network to validate and confirm transactions.

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On September 7, 2017, Equifax, one of the three main credit reporting agencies, announced a massive data security breach that, according to the Wall Street Jurnal, exposed vital personal identification data — including names, addresses, birth dates, and Social Security numbers — on as many as 143 million consumers, roughly 55% of Americans age 18 and older.

This data breach was especially egregious because the company reportedly first learned of the breach on July 29 and waited roughly six weeks before making it public (hackers first gained access between mid-May and July) and three senior Equifax executives reportedly sold shares of the company worth nearly $2 million before the breach was announced.

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