Tips to Become a Savvy Investor

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Several steps will set you on a path to becoming a savvy investor. The top tips include seeking professional advice, setting clear financial goals, understanding your risk tolerance, starting early, and educating yourself. On top of these, consumers should also understand the benefits of having a diverse portfolio, how to avoid making emotional decisions when it comes to their money, and always have a long-term view.

Let’s unpack these important tips in more detail.
Seek professional advice:

    In the same way that we visit the doctor for medical reasons, we should consult with a financial professional for financial matters. Speak to a Certified Financial Planner® about developing a robust financial plan that will assist you in using the money you have available to achieve your goals and live a fulfilling life. This financial plan will also provide guidance when those unforeseen circumstances creep up on us.

    Set clear financial goals:

    We all have things that we want to achieve, whether it be saving for a comfortable retirement, studying to obtain a Masters degree or even just going on that cruise. Be very clear and descriptive about your goals and work with your financial planner to develop a plan for each one. The timeframes attached to these goals are also important as that has an impact on the appropriateness of the investment for each goal.

    Understand your risk tolerance:

    Your ability to take on risk and your risk appetite is also important. Your ability to take on risk depends on your circumstances and the resources you have available, while your risk appetite is the level of risk you are willing to take on. It is important to understand how much risk you need to take on when investing and how much risk you can stomach, and then find the right balance.

    Start early, save consistently, and reinvest your dividends:

      The value of compounding over time cannot be stressed enough. The earlier you start investing, and by reinvesting the returns earned, the more time you have for your investments to grow before needing to draw from it. You also get the advantage of your returns earning returns, instead of only your contributions. Investing consistently also creates discipline and maximises the potential return you can earn. R1 000 in a fund that earns 10% will give you R100, but R10 000 in the same fund will give you R1 000. The percentage return is the same, but the more you invest, the higher return will be in Rands.

      Educate yourself:

        Better financial education leads to better-informed decisions. Speak to your financial planner about the investment products you are invested in, as well as the products available to investors. Find out about the benefits, the costs, and how it aids you in your financial plan. Investments are about more than just performance. Your portfolio should also be tax efficient, structured to bring about your estate planning wishes, and should be appropriate for your specific goals.

        Diversify your portfolio:

          By investing across different asset classes, different geographical regions, and different fund manager styles, you diversify your portfolio and reduce the risk over time. Ever heard the saying “Don’t put all your eggs in one basket”?

          Don’t make emotional decisions:

          We are all human and emotions can cloud our judgment, whether it is positive or negative emotions. It is important to not make financial decisions in moments of high emotion. This is where a financial planner also adds value as it helps to have objective guidance in these times.

          Keep the long-term in mind:

            Market fluctuations can be very demotivating. It is important to focus on the long-term, focus on your goals, and try your best to not look at your investment values too regularly. Remember that some investments can drop in value from one day to the next, but these same funds can provide higher returns throughout 7 to 10 years. Your financial planner will also assist in ensuring that your money is invested appropriately for its purpose. Always keep your eye on the end goal!

            Article by: Lana Visser-Galant, Certified Financial Planner, Fiscal Private Client Services