Masterful Strategy

“Our greatest motivation in life comes from not knowing the future.” (Thomas Frey)

Investing is an exercise in uncertainty. When you make any investment, you are taking a bet on the future.

This can be a hard thing to do. Markets move up and down, economies shift, and geopolitics can make everything feel unhinged.

At least, that’s how it feels in the moment. At any given time, there’s always something to worry about.

Yet, when we look back, things can seem very different. For example, if you’d been invested in global stock markets over the past 15 years, you would have done incredibly well. From today’s vantage point, it’s easy to say you made a great investment that has gone up in pretty much a straight line.

But, in reality, there were plenty of moments along that journey when things would have felt unbearably uncertain – after all, this period includes a global pandemic, wars in Europe and the Middle East, and five instances where the market fell more than 20%.

Making good decisions

Given how things have turned out, it’s easy to forget now the kind of anxiety those events caused at the time. After all, we now know that none of them permanently disrupted the upward trajectory of the market. As finance writer Morgan Housel points out, we don’t feel that stress, because we know how the story ends.

But for anyone navigating today’s market turbulence, uncertainty is all too real. South African investors have been watching global markets react sharply to every comment from the new American president, and even what he says about South Africa. This is hard to stomach, because we don’t know how things will turn out. 

We have to, as Housel puts it, “manage the psychology of uncertainty”. Because, to some extent, all investors have to accept an unknowable future. The best we can do is look at what has happened in the past. 

And what the past tells us is that the real challenge for investors is not just making good investment decisions, but managing the emotions that come with them. Those who are able to sit out the difficult times, stay invested, and let compounding work in their favour over time have always reaped the rewards.

Navigating uncertainty

With that in mind, here are some practical strategies to help investors navigate uncertainty without falling into emotional traps.

1. Acknowledge that uncertainty is normal

Market uncertainty isn’t a temporary phase – it’s a permanent feature of investing. There will always be reasons to worry, whether it’s interest rate changes, economic downturns, or political developments. The key is to recognise that uncertainty does not mean doom. Markets have historically rewarded long-term investors who stay the course despite short-term fears.

2. Focus on the long term

Short-term market movements can feel overwhelming, but they are often just background noise in the overall symphony. Looking at a long-term market chart shows a steady upward trend, despite numerous corrections and bear markets. If you’re investing for retirement or wealth accumulation over decades, what happens over the next six months is far less important than your overall strategy.

3. Tune out the daily noise

In an age of instant news and social media, it’s easy to get caught up in every market-moving headline. However, reacting to daily news cycles can lead to poor decision-making. Instead of following every fluctuation, focus on the fundamental reasons you invested in the first place.

A practical step is to limit how often you check your portfolio. The more often you look, the more volatility you will see. 

4. Reframe how you think about risk

Markets moving up and down over short periods of time may feel disorienting, but it isn’t risk. The only real risk you face is not meeting your investment goals over time. Remind yourself that downturns are a normal part of market cycles, and of investing. Historically, markets have always rebounded.

5. Seek professional guidance

Investing can be overwhelming, especially during periods of heightened uncertainty. A financial advisor can provide an objective perspective and help you stay aligned with your long-term goals. If you find yourself second-guessing your investments frequently, consulting a professional can give you peace of mind.

The bottom line

Uncertainty is an unavoidable part of investing, but it doesn’t have to be a source of anxiety. By accepting that uncertainty is normal, maintaining a long-term focus, and using disciplined strategies, South African investors can navigate volatile markets with confidence. The key is not to predict the future, but to prepare for it – and to stay the course despite the inevitable ups and downs.

If you have absolutely any questions about your investment portfolio, please give us a call.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.

© FinDotNews

“Focussing is about saying no.” (Steve Jobs)

What is the point of investing? 

In simple terms, there are only two reasons to invest:

1. To save for a specific goal like sending a child to university or taking a holiday. These are finite targets with clear time frames.
2. To achieve financial independence. This means building a pool of wealth that can generate a passive income stream so that you no longer need to work to sustain your lifestyle.

Investors who understand these goals also understand why fear of missing out (FOMO) gets in the way of a good investment strategy. In both cases, what matters is achieving consistent growth over time, not quick wins.

The problem with FOMO is that it encourages exactly the opposite – chasing trends and new ideas in the hope of a short-term windfall. 

Where FOMO comes from

FOMO is rooted in the human impulse to compare ourselves to others. When we see friends or family making quick profits, we want a slice of the action. This can lead to impulsive decisions such as:

• Chasing hot stocks or trends. The trouble with this is that investors can easily buy into assets that have already experienced significant gains. Often this leads to buying at inflated prices.
• Abandoning long-term strategies. When investors see short-term opportunities, they may abandon their well-thought-out plans in pursuit of quick wins – which can derail their financial progress.
• Taking on unnecessary risks. FOMO can push investors to take on higher risks without fully understanding the potential downsides.

The illusion of big gains

One of the most misleading aspects of FOMO is that those talking up an idea rarely share the full picture of their investments. They may boast about being invested in a particular stock that doubled in value, but forget to mention how much of their portfolio was actually invested in it.

For example, your buddy might claim they made a 100% return on a hot investment – but if that investment only made up 2% of their overall portfolio, the impact on their total wealth is minimal. This selective storytelling can give others a distorted view of the potential returns and risks involved.

This highlights the importance of diversification and managing risk. It’s crucial to remember that successful investing isn’t about finding one magical investment, but rather building a balanced portfolio that grows steadily over time.

How to keep the FOMO at bay

To keep FOMO out of your investment strategy, consider these practical steps:

1. Know your plan. The best way to avoid FOMO is to have a clear investment plan. This includes setting realistic goals, understanding how much risk you are willing to take on, and choosing an asset allocation that suits your needs.
   
2. Automate your investments. An effective way to remove emotions from investing is to automate your contributions through a regular savings plan (usually by setting up debit orders). Investing a fixed amount at regular intervals, regardless of market conditions, reduces the risk of making impulsive decisions.
   
3. Diversify. Diversification is a proven way to manage risk. By spreading your investments across different asset classes, sectors, and geographies, you reduce the impact of relying on any single asset’s good performance – or suffering from its poor performance.
   
4. Tune out the noise. Financial news and social media are major sources of FOMO. Limiting your exposure to these can help you avoid the temptation to react to every market move. The media loves to tell us how much the JSE or the gold price went up or down every day, but in reality this is meaningless information. What matters to an investor is long-term growth, not short-term volatility.

Understanding risk and reward

The source of FOMO is always seeing or hearing some recent success story. It’s human nature to want to participate in something that’s going well.

But the reality is that it’s almost impossible to rescue a failing investment plan with a high-stakes gamble. What definitely does work, however, is being an investor who sticks to a well-constructed financial plan for achieving financial independence steadily and sustainably.

To discuss your investment portfolio, speak to us.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.

© FinDotNews

“A big lesson in life is never to be scared of anyone or anything”. (Frank Sinatra)

If you were born between 1946 and 1964, you are part of the Baby Boomer generation. This generation is known to be flexible and robust, having lived through many bulls and bears over the decades.

Whether you’re contemplating retirement or already ticking off your bucket list, here’s what you need to know about managing your money to make the most of life. 

Same same, but different

As mentioned in our previous Evolving Wealth articles, it’s not safe to generalise about an entire generation. Baby Boomers are often split into two different groups with some shared traits:

• The wise generation (aged 72–79)
  This colourful group grew up during transformative times. They lived through the Space race, the hippy generation and the onset of apartheid. They are celebrated for their aspirationalism, uniqueness, and adventurous spirit. 
  
• The vibrant boomers (aged 59–71)
  This subgroup experienced the fallout from the Vietnam war and the impact of sanctions and divestment as local and international opposition to apartheid grew. As a result, this younger generation of Boomers tends to be more questioning and realistic. 
  
  Despite these variations, the wise and vibrant boomers share some main characteristics, including: 
  
  • A dedicated and disciplined approach to their work. They are also goal-oriented and competitive. 
  • They like to invest in property, as it’s an asset class they understand. They tend to be risk-averse and often favour unit trusts. Boomers are more likely than other generations to use professional advice for their retirement planning. 
  • They appreciate travel and rich family experiences.
  • Although they may be slower learners, they are unexpectedly tech-savvy and dedicate themselves to continued online learning.
  • Regarding value systems, they’re loyal, respect authority and have a strong sense of civic duty and community involvement.  

Navigating retirement in a world of rising healthcare costs

Retirement can stretch for decades these days, making planning beyond traditional company pensions essential. We highly recommend that Baby Boomers continue to work for as long as possible to accommodate rising healthcare costs and general living costs. 

Mastering money moves for a prosperous future

Here are some other savvy moves for Baby Boomers to make: 

1. Don’t skip estate planning
   Baby Boomers often consider themselves invincible, but realistically, having all your affairs in order becomes more important the older you get. This includes maintaining a valid will (Last Will and Testament), general and bank powers of attorney and a Living Will. Also remember to check all the beneficiaries on your life policies. 
   
2. Consider downsizing
   Downsizing is challenging, as you may need to let go of many items that bring back happy memories. But once you’ve gone through the process, and simplified your life, you’ll feel a massive weight lifting from your shoulders. 
   
3. Life or Living Annuity?
   Deciding between a living annuity and a guaranteed annuity can be daunting. Each option has its pros and cons, so consult a professional to determine what’s right for you.

The bottom line: It’s your time to shine 

You’ve spent your life working hard and thinking out of the box, and retirement should be no different. With careful planning, the years ahead can be some of your most rewarding. Ready to take charge? Please get in touch with us if you’re a Baby Boomer and want to discuss any of the above.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.

© FinDotNews

“If you want something done right, do it yourself” – (Unofficial motto of Gen X)

Gen X is the somewhat enigmatic generation group wedged between Baby Boomers and Millennials. Born from 1965 – 1980, they’re currently between 45 and 60 years old. 

What’s in a name?

The term ‘Generation X’ was first used in a book of the same name, published in 1965 by British journalists Jane Deverson and Charles Hamblett. Its interviews with anti-establishment teenagers who spoke about their “hates, hopes and fears” made a real splash at the time. The term was revived in 1991 to refer to the group born after Baby Boomers.  

Culture clash

As mentioned in our previous articles on Gen Z and Millennials, it’s dangerous to generalise about an entire generation. That said, lots of Gen Xers were shaped by the following trends:

• Music videos, grunge, alternative rock and hip-hop 
• Low birth rates and the tendency to have children later in life
• An increase in divorce rates
• Realising that it’s OK to self-actualise/fulfil one’s potential 
• Women entering the workforce en masse 
• The emergence of ‘latchkey kids’
• Needing to care for both growing children and ageing parents 
• The Aids epidemic and the end of apartheid

Financial experiences

If you’re a Gen Xer, your financial experience has included the dot-com bubble burst, the 2008 stock market crash and the 2007 – 2013 global recession. On average you’ve been working and investing during a period of lower returns than that experienced by Baby Boomers.  

You may not be able to rely on traditional pension plans to assure you of a comfortable retirement. In fact, a study by JP Morgan Asset Management found that Gen X is the first generation to be worse-prepared for retirement than their parents. 

You’re more likely to use ETFs (exchange-traded funds) than other generations and are prone to invest in balanced investments. Both reflections of a tendency to avoid risk. 
As a Gen Xer, you’ve had to figure things out yourself and not take anything for granted – two useful life skills.

3 top investment tips for Gen X 

It may have been a rough ride, but you’ve still got time to ensure your retirement is happy and prosperous…

1. Review risk with your financial advisor
   Too little risk could stunt the growth of your investments and put you in danger of running out of capital during retirement. But too much risk could expose you to potential financial loss. Your advisor can assist in getting the right balance of high and low-risk investments.  
   
2. Get out of the debt trap
   It’s important to get rid of any credit card debt and high-interest-rate personal loans. You may also want to pay off your mortgage, even if this means downsizing your home. That said, don’t fixate on eliminating debt to a point where it affects your ability to save for retirement. It is possible to tackle debt while remaining on track with other financial goals.
   
3. Plan for the unexpected
   If you’re a Gen Xer, there’s the very real possibility that you need to expand your emergency fund. Older children cost more than younger ones and you may also have to assist your parents financially. Be prepared for events such as weddings, additional family cars and, sadly, even your parents’ funerals.

The way forward

As a Gen Xer you’re used to making your own way, and the second half of your life should be no different. Age is just a number and you can still adjust to a changing world and acquire new skills. You may need to switch careers to extend your working life and you’ll certainly need to focus on keeping up with technology. And remember: all the retirement planning in the world is worthless if you don’t keep healthy and remain active. 

Speak to us if you have any questions about your financial plan. 

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.

© FinDotNews