Ways to be Wise with your Investments

By Tarryn McDairmant, 20 April 2020

We have officially been in lockdown for over 3 weeks here in South Africa. It has not been an easy time, but it has put quite a different perspective on things. We have had to convert our homes into gyms, schools, offices, and playgrounds. And every time we think we cannot take another change; we somehow adapt and move on. It’s human nature and thank goodness for that, but we are also creatures of habit and in this article, I would like to challenge you to take a much-needed look at your investments.

“Let men be wise by instinct if they can, but when this fails be wise by good advice.”

(Sophocles, Greek playwright)

You may be sitting at home with more time on your hands than usual, and you keep logging into your retirement or investment funds to see how much they have dropped during this crisis. Watching your values depreciate can be very scary. However, markets do go through these types of cycles and it is all due to investors reacting emotionally. Be careful not to cash in your investment out of fear and therefore physically locking in your losses.

We all know Warren Buffet’s advice of buying at the bottom and selling at the top, but when it comes down to it, our emotions can cause us to make the wrong decisions at the worst times. This is when your asset manager or financial adviser should be assisting you with the decision making. That is why you pay them a fee after all right? At Brantam, we are continuously looking for investment opportunities in order to make the most of changing market scenarios for our clients.

The other thing that happens, which we have sadly seen more times than we would like, is that people follow the herd. So as soon as you have cashed in your investment because of fear, the market will turn around and you will miss that essential part of the upward cycle.

“A wise man makes his own decisions, an ignorant man follows the public opinion.”

(Grantland Rice, American sportswriter)

You are probably seeing and hearing varying points of view on the markets currently. When it comes to shares, some companies are not going to make it through this, and some will come out stronger. It can be a risky bet to pick a handful of shares to invest in when economies and circumstances are so unpredictable. Likewise, interest rates are falling, so money market rates are coming down. And with the Moody’s downgrade our government bonds are open to a lot of volatility. Listed property REIT’s are going to struggle to get tenants to pay their rentals, and in the offshore space, the Rand is not at a level that would provide value in foreign currency.

Don’t get me wrong, within each of these asset classes, there are gems and opportunities that are going to produce some wonderful returns for investors. But you must know what you are doing and have the most information possible at hand. Again, this is where your asset manager or financial adviser comes in, to guide you through this maze of investment options. Each person’s income, financial needs, life stage and situation are different, so you can’t do what your friend suggests just because it sounds like a good idea. If it sounds too good to be true, it probably is!!

“It is easier to be wise for others than for ourselves.”

(Francois de La Rochefoucauld, French author)

Those with children will know that expenses relating to their schooling is ever increasing and causes quite a lot of stress for you as a parent. If you have a savings account for your child, or have been thinking about starting one, now is a great time to do this.

Usually you would invest in a high-risk fund for your children, as they have time on their side. The current market conditions have caused higher risk funds to decrease in value and therefore, you can buy in at lower prices, providing a good base for the investment. When the market turns around (as it already has started to do in the last week), you can be positioned to take part in the upturn. Then, when the day comes to use the money for schooling, university or overseas travel, there is something there for them.

“It’s always better to be wise than to be smart.”

(Alan Alda, American actor)

As awful as this pandemic has been, the lockdown has given us one gift…the gift of time. I often hear people say they must simplify their finances and understand what they are invested in. Now is the time to do just that! Start by getting all your statements together – whether it be insurance, investments, savings, loans, or your bank statements. Financial advisors, like myself, are still available to look at your finances and give advice on how to make them work better for you.

The main things to look out for are having too many of the same type of policy, paying high fees where you do not need to, being invested in inappropriate funds for your risk profile, or even having ‘tax efficient’ savings that are not necessarily helping you in the best way. If this pandemic and lockdown has taught us anything, it is to simplify our lives and we need to do this in all areas: home, work, finances, and relationships.

Know what debit orders are going off your account. Do you need to change the debit order dates, increase or decrease them, or cancel them all together? Seeing where your expenses are at this time might also help you to refocus your finances in general. If you do end up saving extra, there is so much you can do with it. Start a savings pot, make that donation you’ve been meaning to, or actually have money aside for Christmas presents, a new car or a deposit on that new house when things do return to ‘normal’. So many of us are guilty of living beyond our means, so now is a good time to really take control of that.

In summary, don’t let this lockdown period pass you by without having done some sorting out and simplifying of your finances. I assure you; it will give you peace of mind to tackle the weeks ahead!

“Nine tenths of wisdom consists in being wise in time.”

(Theodore Roosevelt, 26th President of the USA)