The Importance of Investments in achieving your Financial Goals
Posted in Broker In Your Pocket on Feb 12, 2024
The Importance of Investments in achieving your Financial Goals.
Investment planning is probably more important now than ever, simply because we're going through such difficult times. In particular, we're looking at inflation. So, the most trustworthy way to mitigate inflation is to invest your money.
Investment goals will vary between clients. Some clients may want to prioritise their retirement planning. Some clients may want to prioritise children's education, but at the end of the day, we always have a financial plan to take care of those things. Once we've got your investment planning taken care of we go one step further. We start to look at diversifying the portfolio.
Diversification is probably the most interesting and crucial part of financial planning. Probably the most common statement I hear from clients is "Please don't put my eggs into one basket". So, the way I look at diversification is to look at it from three directions.
First and foremost, diversifying your asset classes. Firstly, looking at a good balance between your cash, your property, your bonds and your equity. Secondly, diversifying your actual investment wrapper. Now we're looking at a good balance between flexibility, liquidity and even tax deductibility. And the last way we diversify is diversify globally. Why wouldn't you want to have a bit of your money offshore - simply because they are stronger currencies, prevailing interest rates in emerging markets. We don't have certain markets in South Africa that clients can capitalise on globally.
So, to talk about my first point, diversification of asset classes, we want to achieve 2 things: We want to maximize your upside and we want to mitigate your downside.
Investing in your slightly more aggressive asset classes like your equity and your property will help maximize your upside. But investing in things like bonds and cash, especially today with higher interest rates will mitigate that downside.
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