“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

“Some things are up to us and some things are not up to us.” (Epictetus)

Investing can often feel hard. The keys to success may seem daunting.

Is your fund manager making the right decisions? Is the market going up or down? Is the rand strong or weak? These things often play on our thoughts and cause us to worry about our investment plan, particularly because they’re not things we can do anything about (and they’re often the same for everyone).

But the truth is that success in investing doesn’t really rest on any of them. What really matters in the long run are three simple things that are actually in your control – how much you’re paying in fees, how much you invest, and how long you stay invested.

These are far more significant than the worries that tend to grab our attention as investors, and here’s why:

1. Control costs: Small savings add up

Investment costs are one of the few predictable aspects of investing, making them an easy win. Whether you’re investing in a retirement annuity, a unit trust, or a tax-free savings account, every fee that you pay effectively comes out of your return, reducing the effect of compounding. And while fees might seem negligible on a yearly basis, they add up significantly.

Take, for example, two investors, both of whom invest R100,000 for 20 years. One investor pays annual fees of 2%, while the other finds a lower-cost option charging just 0.5%. At an average annual growth rate of 8%, the low-cost investment grows to R466,000, while the higher-fee investment only reaches around R377,000. The extra 1.5% in fees ends up costing over R90,000 – nearly the initial investment amount!

Simply put: by keeping your costs low, you keep a more significant share of your returns, which is crucial for long-term growth.

2. How much you invest: Build wealth through consistency

Another major factor within your control is the amount you save and invest. It’s simple: the more you invest, the more capital you have working for you, compounding over time. Regular contributions, even during market downturns, help you capitalise on periods when asset prices are low, giving you better returns in the long run.

Consider the experience of two investors over a 20-year period. The first invests R1,000 every month, and the second R1,200. This may sound like a small difference, but if both investors receive the same 8% annual return, the first will reach R589,000. The second will have R707,000 – over R100,000 more!

For South Africans, starting early and saving regularly is particularly important given our relatively high inflation rate. The power of a disciplined saving habit helps counteract the effects of inflation, ensuring you’re steadily building wealth.

3. Time: The magic ingredient for compounding

The single most powerful force in investing is time. The longer you stay invested, the more your returns can compound, creating exponential growth. Even modest returns grow substantially when given enough time.

Let’s look at the case of two investors, each investing R50,000. Investor A leaves their money invested for 10 years at an average annual growth rate of 7%, while Investor B stays invested for 20 years. Investor A’s money grows to R111,000, while Investor B’s grows to more than double that – R246,000. By simply remaining invested longer, Investor B achieves significantly better returns.

In the South African context, where markets can be volatile, committing to a long-term view is even more crucial. Short-term currency fluctuations and economic shifts may tempt investors to pull out during rough patches. However, staying invested allows time for the market to recover, smooth out short-term losses, and capitalise on periods of growth.

The benefits of focusing on what you can control

By concentrating on costs, savings, and time, you avoid the distractions of market predictions and news cycles. Trying to time the market can lead to missed opportunities and losses. A consistent strategy is far more reliable, as it is built around principles that remain effective even as conditions change.

Consider the tumultuous year of 2020, when markets initially plummeted due to the Covid-19 pandemic, but rebounded within months. Investors who tried to “time the bottom” often missed the rapid recovery that followed, while those who simply continued their regular contributions benefited from the rebound.

Focusing on costs, savings, and time helps you build resilience into your investment strategy, setting you up for consistent growth rather than reactive decisions. While it’s normal to feel anxious about market movements, focusing on these factors that are within your control provides a much more stable foundation for building wealth.

To discuss your investment plan, 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

“Life is what happens to you while you’re busy making other plans” (John Lennon)

Millennials comprise 25 to 35% of SA’s population, representing various interests, backgrounds, and lifestyles. It’s also helpful to distinguish between older Millennials and younger ones. The older cohort grew up with PCs and video games, while the younger Millennials were raised on smartphones and apps.

Inside your Millennial mindset

Millennials are a values-driven generation that prioritises family, community, and creativity. As digital natives (especially the younger half of the cohort), you’ve grown up alongside rapidly evolving technology and embrace new forms of communication, enjoying how they allow you to connect with the global village. Your generation also values environmentally conscious practices, often opting for eco-friendly products and sustainable living choices.

Millennials invest heavily in human capital, prioritising education and self-improvement more than previous generations. Although many gravitate towards STEM fields — science, technology, engineering, and mathematics — there’s a growing interest in social sciences and applied arts. Millennials are also known for their willingness to take risks in the workplace. Many pursue passion-driven careers, dream jobs, and side gigs while also emphasising a healthy work-life balance.

Travel is another major priority. Millennials tend to explore the world frequently, often choosing experiences over material possessions. Unlike previous generations, they are more likely to rent than buy, finding flexibility and mobility preferable to traditional homeownership.

Millennials and money

Millennials tend to be cautious investors and are often more focused on avoiding losses than chasing gains. After seeing their parents’ or grandparents’ financial struggles, they typically save more than previous generations (some studies show they save around 18% of their income, compared to Baby Boomers’ 11%).

Many Millennials are risk averse, sometimes to their detriment, as they know about economic downturns. This conservative approach can result in missed opportunities for long-term growth through compounding and equity gains. Quick to adjust based on current data, Millennials sometimes make rapid changes that might impact their investments’ long-term potential.

Millennials use social media, financial apps, and online calculators to find investment insights. They prefer digital interactions and can make investment choices with just a few taps on a smartphone. They are known to dedicate time to tracking their investments (some up to seven hours a month) and are faithful to brands that offer seamless tech experiences. Some Millennials are “crypto-curious” or drawn to robo advisers.

Living longer, planning smarter

Humans are living longer than ever before. Already, global life expectancy stands at over 70 years for men and over 75 years for women. And these figures are expected to increase rapidly due to advancements in healthcare, nutrition, and wellness practices.

A recent study suggests the maximum human lifespan could extend to 150 over the next three centuries. This calls for investing more in equity for retirement.

Navigating your financial future with smart tools

Many Millennials find online calculators and tools valuable for guiding their financial decisions. You can find all kinds of calculators online, including:

• Retirement calculators: Estimate how much to save monthly for a comfortable retirement.
• Goal calculators: Use this tool to determine monthly contributions to achieve specific goals, such as paying for Junior’s varsity education or taking an overseas trip.
• Investment selector tools: Like Tinder for investments: match with investment options that align with your risk tolerance and timeline.
• Tax-free investment calculators: See how much tax you can save over time by investing in tax-free funds.

These tools are designed to inform and educate but don’t replace professional advice. Consider them a learning resource to help you understand your financial possibilities.

The power of a personal financial guide

While relying on digital tools alone is tempting, it’s worth putting in the time to build a relationship with a trusted financial advisor. Digital tools and robo-advisors lack the personal context essential for complex financial decisions.

A good advisor knows what makes you tick. And they can use their experience to help you ride out market fluctuations and keep your investment strategy on track for the long haul.

By all means, use those apps and calculators for quick insights – but remember that nothing beats the human touch. Investing doesn’t have to be intimidating. Take it one step at a time, leverage the resources available, and consider the balance that best suits your values and goals.

Contact us if you’d like to discuss any aspect of this article. And please feel free to share it with any Millennials in your circle.

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