Keep calm and have an investment plan
Have you ever heard people talk about stocks, bonds, or mutual funds and it all sounds a little confusing? If you understanding some basic information about investment Ascor® can help you to take that first step in learning how to invest.
It is very important to know your path to retirement, or maximizing the rate of return
A financial investment is an asset that you put money into with the hope that it will grow or appreciate into a larger sum of money. The idea is that you can later sell it at a higher price or earn money on it while you own it.
In South Africa, the daily and Sunday newspapers are filled to the brim with political scandals in South Africa, economic problems and anything in between.
What, if anything, should be done about all this noise in the market and how should it influence your investment portfolio?
It is true that many investors, especially those who have retired or are retiring soon, watch the news with trepidation. Every new scandal seems to move the markets, which is already showing signs of a general slowdown in the current economic climate.
And one cannot argue that the negative news and depressed economy is influencing your investment portfolio. Over the last 12 months for instance, the overall JSE has declined by 7% and from week to week many indicators swing wildly from positive to negative growth.
What is interesting, is that the investors who take the largest loss and see the biggest decline in their portfolio, are those that panic and try to react to the newest short term scandal and its impact on the market.
Apart from incurring costs by hurriedly extracting or moving his or her investments, this investor often loses out on the initial growth spurt thereafter, when the market recovers from the short term movement.
Here are two pieces of advice that Martin de Kock, director of Ascor® Independent Wealth Managers suggest in an unstable market.
Stick to the plan
A good investment plan, with well-defined end-goals and clear investment parameters will almost always outperform those investments that try to time the market or that reacts to every bit of bad news.
Apart from giving consistent long-term growth, a solid investment plan saves you the stress of worrying about every move in the market.
Invest off shore
In difficult markets such as these, it is prudent to invest as much as possible in more stable and better performing off shore investments. The South African government, through Regulation 28, restricts this investment to 25% of a portfolio and we usually advise that you make maximum use of that.
One should also keep in mind that most of the Top 40 listed companies on the JSE make the bulk of their income abroad, so simply investing in these shares can give you indirect exposure to off shore markets.
In conclusion, you should never panic, because panicked decisions cost you dearly. To help with that, create a long term plan and increase your exposure to off shore investments.
Lastly, get a professional Certified Financial Planner (CFP) on your side and they will help you keep calm and plan for the long run.
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