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We’ve filled the shopping malls, emptied our wallets, and packed the beaches in what I’m sure was quite an enjoyable festive period for all. But just as quickly as the holiday period began, it all came to an abrupt end and it’s time to refocus and bed down our goals and ambitions for 2014. Whether it’s losing 5kg, learning a new language, or dusting off that old guitar, we all have new resolutions and goals we’d like to achieve within the next 12 months. As our individual resolutions change with each year, one topic should continually be addressed with similar diligence: “Are my investment objectives still being met?”

Just as it is important for a farmer to monitor the progress of his crop before harvest, it is equally important to do a health-check on our investment portfolios well before maturity/retirement. Personal finance is exactly that: personal. As time evolves and your lifestyle changes it is important to ensure that your investment objectives are still being met. Here are some important considerations when revisiting your investment objectives:

  • Have my personal circumstances changed? It is important to adapt your personal investment savings to complement your current life and lifestyle. Getting married, expanding your family, or the purchase of additional assets may affect your propensity to save. Ensure that your personal savings and investments are geared around your ever changing financial situation.
  • Has my personal income changed? Income levels change frequently, especially for young professionals climbing the corporate ladder. If your plan was to invest 10% of your salary, your investment amount may be lagging your income progression for fixed amount investors. It is important to ensure that your investment/savings not only keep up with inflation, but with your personal income growth as well. Another consideration when assessing personal income growth is tax sensitivity. Your current savings could be better suited to a product or fund which is more tax-efficient for long-term savings.
  • How has my investment been performing? While it is important to seek funds with strong returns, it is also important to understand the way the fund is managed as well as the allowable instruments within the portfolio. Last year showed strong diversion between the returns from equities, bonds, property and cash, and knowing your portfolio’s exposure to these asset classes may help you understand the performance of your fund.
  • Have there been major changes in the management of my funds? A change of portfolio management could introduce qualitative risk within your investment portfolio. A new fund manager or investment team could have a completely different philosophy and investment process which could dramatically affect the performance and volatility of your investment. Make sure to keep an eye on any changes at the investment house with which you are invested.

If you’re new to investing and don’t have any savings vehicles, now is the perfect time to start! Albert Einstein once claimed compound interest to be the eighth wonder of the world, and the sooner you start saving the sooner you’ll benefit from the power of compounding. Draw up a monthly budget and determine what amount can be set aside for savings. Bear in mind this money is for you, so don’t be shy to save a generous amount. Make sure to establish investment goals and be diligent in your monthly saving and over time you’ll be handsomely rewarded.

The world of investing can seem really complex and filled with many technical terms requiring a finance degree to decipher, but it’s much simpler than you think. If you’re unsure of which instruments or funds to invest in, choose the simple or low-risk ones as a starting point. Their potential returns may seem feeble, but they’ll allow you peace of mind as an inexperienced investor. The role of a financial adviser is important in these instances, so seek financial advice before making a decision. Once you become more financially savvy, the world of investments becomes less intimidating and you can invest with confidence.

Investment information used to be scarce and filled with jargon, but the evolution of the internet and financial media has made it much easier to become an educated investor. There are numerous financial publications and credible websites which demystify investing. Be an astute investor, educate yourself and reap the benefits of financial intelligence.

The current investment environment is shrouded by market commentators claiming unsustainable valuations and warning against the likelihood of past performance repeating itself. Investor eyes are focussed on the US Federal Reserve’s decision on when they will be tapering and ultimately bring an end to their current quantitative easing programme, Europe and China’s economic recovery, local elections and the weakness of the Rand. While these issues are prevalent and will continually be monitored in the short term, the basic principles of long-term investing remain. There have been periods of market correction before, so remove emotion and remain committed to your long-term investment objectives to reap the rewards.

We’re all hoping for a happy and prosperous 2014. Take a step in the right direction by contacting your financial adviser and ensuring your financial fitness is one resolution you will accomplish this year.

Sanlam Life Insurance is a licensed financial service provider.
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