Although the agricultural sector is all too familiar with the unpredictability of seasons, proper planning and structure create more certainty and pave the way to long term success.
To stick to some timeless investment principles could in the same way also guide investors through the challenges of slower economic growth and volatile markets.
Keep investing at regular intervals over the long term
Most people want to invest when markets are doing well and tend to disinvest when the markets fall. It makes better sense to keep on investing through market lows when share prices are undervalued and a lot cheaper, so that you gain more wealth during the highs.
Understand your time horizon and risk profile
They affect how you invest. The younger you are and longer you have to invest, the more risks you can afford to take. If you have 18 years or so to invest, you could invest in high-risk markets – focusing on the end destination instead of the short-term ups and downs – which should ensure the best return on investment.
On the other hand, if you only have five years to invest, you should consider a more cautious investment strategy, because you won’t have the time to make up for market losses. Remember that cash is unlikely to outperform inflation over the longer term, although it may be seen as a safe haven during uncertain times.
Diversify, so that when one market does not perform well, you will still have other investments doing their best for you … thus managing their risk in the process. Don’t focus on returns from individual investments. See your investment portfolio as a whole.
Balance your portfolio
Do not invest only in property or only in cash. Seek to maintain a sensible balance between different types of investments. There will always be times when one asset class outperforms another. Remember that cash and bonds provide stability whereas shares and property provide growth.
Historically, equities have provided the strongest returns over the long term, despite downturns. However, it is important that it forms part of a diversified investment portfolio structured according to your risk profile and end-term goal.
It is time in the market that counts
It is time in the market that counts, not timing in the market. The longer investors are in the market, the better the likelihood of making up for losses.
Furthermore, the sooner you start saving, the more time you have to earn compound interest. The principle of compound interest basically means that interest is earned on the interest already earned, so that the effect is a dramatic snowballing of the money invested and the interest earned. The rewards are high for those investors who have the discipline to commit to an investment and stay with it for a long period.
Remember that each person is unique
What’s a good investment for one person, is not necessarily a good investment choice for you.
Invest with a company that has a proven track record
Do not invest with a company that offers astronomical returns that are simply not viable in current market conditions. Choose a professional portfolio manager whose job it is to investigate opportunities and make sound investments.
A sound financial plan helps to achieve success
This is true, regardless of what the market is doing. Speak to an accredited financial adviser who complies with the Financial Advisory and Intermediary Services Act (FAIS) to help you compile a holistic financial plan that meets your requirements and takes your current circumstances into consideration.
This way you will stand a good chance of making adequate provision for the future, and be able to reach your investment goals. Should you not have an adviser, please click here to find an adviser or dial 0860 60 60. – Old Mutual