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1. A sound financial plan helps build confidence regardless of what the market is doing - Financial planning is about finding a solution that satisfies your particular financial needs. Your financial plan should be tailored to your individual or corporate needs and risk profile. Your financial planning should include determining your goals, current financial position, planning horizon and risk profile. Once you have established your plan, it is important to review it regularly with the help of a well-qualified licensed financial adviser, broker or corporate consultant.
2. A diversified portfolio will help to manage your risk - For most investors, a sound financial plan includes a balanced portfolio of investments, with shares, bonds, cash and property, invested in both local and international markets. Diversification works for you by combining a range of different asset classes, ensuring that you don’t have too many eggs in one basket. The result is a lower level of overall risk, while still enjoying exposure to potentially inflation-beating returns.
3. Always consider your investments as a whole - In any diversified portfolio there will always be times when one asset class outperforms another. Property may go up as shares come down. International investments may prosper when local markets fail. It’s the total return over the longer term that matters. Focusing on any one portion of your investment in isolation, or in the short term, may easily lead you to reach the wrong conclusions and thus make unwise decisions.
4. It’s time in the market that counts, not timing the market - Many people believe that knowing when to buy and when to sell is the secret of successful investing. The truth is that no one knows with any certainty when markets will rise or fall. Trying to time the market is not only stressful, it is very seldom successful. It is far better to use time to your advantage. The sooner you can start investing, and the longer you can invest, the more likely you are to make a handsome return – regardless of the ups and downs along the way.
5. Over the long term cash is unlikely to deliver the returns needed to outpace inflation - Investing in cash may seem like a safe bet, especially when markets are volatile, but it comes at the price of lower long-term returns. Every investor does need at least some part of their funds in liquid investments in case of an emergency. And for some investors, a larger cash holding may be appropriate. However, for the bulk of investors who have longer investment horizons, a cash-only investment is unlikely to deliver an adequate return. It needs to be supplemented with investments in other asset classes that offer capital growth potential.
6. By investing on a regular basis over the longer term, you generally get the best return - Research all over the world has proven that investors tend to join late in a rising share market, and then achieve disappointing results when the market falls. By contrast, when the market falls, investors stay out of the market, which means very few people are still buying at the market’s lowest levels. If you are in the market with the aim of building your long-term wealth, it is better to disregard short-term performance fluctuations and to focus on your long-term goals. The wise investor continues to invest through dips in the market, knowing that the cheaper shares become, the greater the potential gain to be made when the market recovers.
7. Invest with a partner experienced in managing different market conditions - In South Africa there are many reputable financial services companies that can help you to manage your investments. Old Mutual has been around for 170 years and is a major global financial services company today. We have the tools, the experience and the people to help your investments to match your needs and goals.
8. Each investor’s solution is unique - Everyone’s circumstances and needs, whether as an individual, a company or a retirement fund, are different. The right answer for your neighbour might not be the right one for you. Licensed financial advisers, brokers, trustees or corporate consultants are trained to help you to think about what you want to achieve, and the best possible way to achieve it. Use them; they help you take the emotion out of investing and provide you with an objective view. It may just be the best investment you ever make.
For advice, contact your Old Mutual financial adviser, your broker or corporate consultant, or call 0860 60 60 60.