Start the year right - Forget 2017, start 2018 on the right foot

The uncertainty in the local market during 2017 saw investors of all wealth brackets seeking refuge in cash. While this is understandable, it is not an investment choice that will help you achieve your financial goals.


The uncertainty in the local market during 2017 saw many South Africans sitting on the sidelines and postponing longer-term investment decisions. With 2018 starting on a more optimistic note, this is a great time to re-evaluate plans and goals, commit to the correct long-term strategy and take action.

“The past year has been an interesting one for South Africans. There have been lots of themes which received significant media coverage and which have caused lots of uncertainty,” says Brian O’Neill, CEO of FNB Financial Advisory. “Where there is uncertainty, people tend to get a very short-term focus and often end up not making decisions. But we can’t become spectators, we need to get back to a philosophy of saving and investing, and investing in the right solutions.”

Crowning off the year with the dramatic outcome of the ANC National Conference, 2017 saw sovereign rating downgrades, interest rate uncertainty, political machinations and corporate accounting scandals. But, notes O’Neill, for investors looking to start 2018 off on the right foot, the likes of the Steinhoff scandal highlight the advantages of an outcome-based investing approach, as well as the important role diversification plays in cushioning your money through the hard times.

“At the moment all of us are very caught up in tomorrow’s headlines and this will probably continue for the next few months. We see that this affects how clients make decisions about their savings and how easily clients are influenced by the short-term movements of the rand and the market. While it is important to keep a close eye on what is happening in South Africa, the key to investing is understanding that the market does – over time – absorb volatility, says O’Neill. “The key is to stay invested, even though the dips.”

O’Neill points out that returns don’t come in a straight line and that “short-term volatility mustn’t distract you from what is ultimately important, which is achieving your goals”.

So, when you start off your new financial year, begin by focussing on the outcomes and goals you want to achieve over the next five years, 10 years or even longer. This will significantly change the way you approach investing. Hopefully, by shifting the focus to attaining your goals, you can start to drown out short-term volatility and rather commit to a solid savings strategy within a well-diversified investment solution. Matching the term of your goal to an investment solution that has a similar duration will ensure you select an investment solution with an appropriate return and risk profile.

This approach immediately changes the “short-term kneejerk” approach into a more level-headed long-term investment horizon, explains O’Neill.

Embedding these behaviours comes back to sound financial education, which remains one of the most challenging hurdles facing South Africans. Despite South Africa’s poor savings rates, most individuals often risk their hard-earned rands on the promise of high returns (which comes with higher risk) rather than putting their trust in time, compound interest and saving more.

After an unpredictable 2017, what South Africans now need is a steady approach to building wealth, believes O’Neill. “It’s important to remind people why they are investing and what for, and reinforce good financial behaviours.” Put a sound plan in place supported by an appropriate investment solution, he says, noting that the FNB Financial Advisory approach centres on building multi-asset portfolios which are a combination of equities, bonds, property and cash (both local and offshore).

Making a decision to invest in this mindful manner must also go hand-in-hand with your lifestyle and family priorities, adds O’Neill. If you are unsure of how to structure your financial goals then don’t struggle alone, he says, rather spend some time with a financial advisor who can take an objective view of your responsibilities, needs and wants and help you to avoid making rash and dangerous decisions.

This type of approach to money will serve you well throughout your life, says O’Neill, who also highlights these additional tips:

Live within your means. Make sure that you aren’t over-spending, this will allow you to save more.

Preserve your retirement money when you change jobs. “Avoid the temptation to dip into these savings,” says O’Neill.

Put aside enough money for short-term emergencies, like unexpected medical costs. This will provide a buffer to your long-term savings.

Avoid dipping into savings. Try to separate these savings from your monthly budget.

Invest your savings in an investment solution that gives you access to sound, inflation-beating returns over an appropriate time horizon.

Referring specifically to the final point, O’Neill notes: “We focus on tailored solutions which enable your money to grow. But, as important as our role in capital growth is, it’s important that we never lose sight of the importance of good financial behaviours: save more, stay invested and guard your retirement.”

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This edition

Issue 72