Top Investment tips to get your financials back on track


With December holiday and New Year expenses putting a pinch on your pockets, you may be one of many looking to get your finances back on track in 2018 by investing your hard-earned savings towards your future. And to cut through the overwhelmingly wide array of investment options available, George Herman, Director and Chief Investment Officer at Citadel Investment Services, offers a few practical tips for building a best of breed investment portfolio as you set out on your savings journey.

“The bad news is that there is no silver bullet for choosing the best investment or best fund, as the top performing funds and fund managers today may not be at the forefront tomorrow,” he notes.

“The key to building an optimised portfolio is therefore to choose funds and fund managers tailored to your individual needs as part of a long-term investment strategy.”

He offers the following simple guidelines for you to follow as you put your money to work:

Step one: Map out your financial goals

Begin developing your investment strategy by simply making a list of your individual financial goals.

“Setting these goals is like setting the destination points on your GPS – you’ll save a lot of time and money by having a clear endpoint in mind instead of coasting around,” says Herman.

“Be as specific as possible, thinking carefully about how much you will need and your time frame.”

This list could include goals from a family holiday to purchasing a new home or car, to providing for a comfortable income in your retirement.

Step two: Choose your basket of assets

Once you have mapped out your financial goals and time horizons, your next step will be to decide your portfolio’s asset allocation, or the mix of your underlying investments.

The four main asset classes are equities or shares, bonds, property, and cash or money market instruments. These asset classes perform differently in various economic environments, and offer varying levels of potential returns according to their perceived levels of investment risk.

Investments in equities, for example, are generally expected to deliver much higher rates of return over the long term than investments in money market funds. However, money market funds are usually less volatile, meaning that your investment in the short term will likely see far fewer ups and downs.

He notes, however, that the best method for reducing your investment risk while still reaching an acceptable level of return is to gradually ensure that you are appropriately diversified. Achieving diversification means balancing out market highs and lows by spreading your investment risk across different asset classes, sectors, regions and with different fund managers with different styles.

“Focussing exclusively on one type of investment would be like a boxer using only one hand. It’s important to use every tool at your disposal to achieve the best possible outcome.”

Step three: Compare your options

There are a range of investment products open for you to invest your money in, each with various benefits and drawbacks. Herman offers a brief checklist for you to ensure that you understand the products or funds that you are investing in, and that they are suited to your individual requirements:

  • Who manages the fund? Who is the fund manager and what is their expertise or experience? Also avoid fraudulent schemes by checking that the fund and fund managers are registered with the Financial Services Board (FSB) by contacting the FSB’s call centre at 0800 110 443.
  • What are the costs? You can compare costs by using the fund’s Total Expense Ratio (TER), which measures the total cost of the fund’s management and operational expenses, expressed as a percentage of the fund’s assets. Consider what value the fund is offering comparative to its fees, as well as whether you may need to pay any additional fees such as brokerage or account administration fees.
  • What returns can you expect? While past performance is never a guarantee of future returns, how has the fund performed compared to other similar funds? Also consider how returns are paid, for example in the form of interest or dividends.
  • How is the investment taxed? Understanding how different products are taxed will enable you to invest more tax-efficiently.

Step four: Review your investments regularly

If you are just setting out on your investment journey, it won’t be possible to invest everywhere all at once.

“It is therefore vital you regularly review your investment portfolio, and continue to adjust your investments and strategy over time to meet your changing needs, for instance as your salary increases, you have a family or approach your retirement,” he says.

“This review should ideally take place once a year in consultation with a trusted financial advisor, who can guide you in selecting the right funds for your individual needs. This advisor will also be able to coach you against making emotion-led investment decisions, and answer any questions you may have about your investments.”



About Author

Thabo Mphahlele is the BizNis Africa Head of Sales and Marketing. Mphahlele was previously MultiChoice Production Support Analyst responsible for developing and monitoring applications. In addition, Mphahlele develops and automates batch scripts and is responsible for the daily infrastructure maintenance at MultiChoice. As a Production Support Analyst, he is responsible for incident analysis solving , developing and constructing business reports for SQL and Oracle and implement change controls for the business. Additional responsibility includes monitoring system performance via SOA, Kibaba (Elasticsearch), H.P BSM, HP Sitescope. Mphahlele is responsible for creating infrastructure performance reports through HP Ops Analytics, monitoring payments via Splunk and in-house built-in tool and disaster recovery simulation and testing. At Nashua Mobile, he was responsible for application development and enhancing the web sites At South West Gauteng College, he was the IT Technician and Network Administrator. During his tenure at Double Digit Media, he was he focused on application and web site development for new and existing clients Mphahlele contributes as a Content Manager for BizNis Africa.

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