FINANCIAL MARKETS JUST PLUNGED, WHAT MUST I DO WITH MY INVESTMENTS?
For the last few days financial markets around the world have taken a massive beating, and this has affected investment portfolios severely.
Some investment gurus are calling it the end of a very long bull run while others are calling it a technical correction.
Whichever one of these groups are correct, there are solid principles that investors must consistently apply if they want to achieve good returns over the long term and avoid making costly mistakes that destroy capital value along the way.
I WANT TO HIGHLIGHT THE FOLLOWING PRINCIPLES THAT ARE IMPORTANT ALL THE TIME:
USE DIFFERENT INVESTMENT STRUCTURES TO CREATE A TAX-EFFICIENT OVERALL PORTFOLIO
One of the few guaranteed returns that investors get is the tax benefits that different investment structures offer, and for me, this is the essential principle of investment management. Investors only have to take advantage of all the concessions that SARS provide regarding tax deductibility of contributions and the tax treatment of returns and capital growth.
REALISE THAT NOBODY CAN ACCURATELY PREDICT WHAT IS GOING TO HAPPEN IN THE SHORT TERM
The best investment gurus in the world cannot predict what is going to happen on financial markets next. However, they can formulate strategies over the long term through diversification to reduce investment risk significantly. Identify your investment goals are and structure individual investment portfolios accordingly There are specific risk and reward guidelines that investors can follow to manage their return expectations for their investments with the eventual results. For example, if an investor decides on an aggressive approach and he/she implements a share portfolio he/she cannot question the investment’s poor return over two years as the agreed term of the investment is ten years. It is the same as asking an engineer who has been given five years to build a bridge where the bridge is after just two years.
ACCEPT THAT THERE IS ALWAYS GOING TO BE VOLATILITY IN FINANCIAL MARKETS
There has never been absolute political and economic stability in the world throughout history, and there never will be. If there are diverse groups with different ideologies, there will always be volatility. However, periods of turmoil have always been followed by periods of growth. The graph on the right reflects the total investment growth of the Naviga Model Portfolios over the last eleven years. This is a good illustration of patience being rewarded over a longer period.
If the above principles are applied consistently the probability that investors will be content with their investment performance over the long term increases significantly.
Please contact me if you have any questions about the above or your overall investment portfolio, I look forward to your feedback.
