Between lockdowns and reduced working hours, it’s no surprise that the average South African is struggling to put away some savings. Saving is an undertaking with responsibility attached to it.
Multi-management is an investment approach that can help make the savings journey simpler, smoother and safer for many investors.
Are you looking to invest your savings and convert those savings into wealth over time? Riccardo Fontanella, head of technical marketing at Alexander Forbes Investments, says that South Africans should consider the following:
- Diversification
Invest in different investments such as equities, property and cash, across different sectors, currencies and regions. This helps reduce the overall investment risk that your savings may be exposed to and smooths short-term fluctuations in your investment returns. It is unlikely that all investments move in the same direction, at the same time in response to a specific market event.
- Solid portfolio construction
Spread investments in a way that minimises short-term investment risk without reducing long-term return potential. Portfolio construction techniques and principles will increase the potential for performance to be in line with investment objectives and risk constraint.
- Compound interest
Get to a point when the interest you are earning on your investments is earning interest. The key is to start investing as soon as possible as much as you can afford. When time is on your side, compound interest can play a big role in fuelling long-term savings growth.
- Provider selection
Find service providers that apply their investment philosophies reliably over time. Investing with asset managers with dependable investment styles can:
- produce repeatable outcomes
- help build portfolios with reliable investment performance, aligned to your expectations
- Minimise behaviour bias
Stay appropriately invested throughout market cycles by remaining committed to long-term savings goals. Extreme ups and downs in the market can cause South Africans to react emotionally rather than investing rationally. Are you facing short-term pressures that will undermine sound investment principles? A relationship with a trusted, and accredited, financial adviser can help investors rededicate themselves to their long-term goals.
- Making better choices
As the number of saving choices grow, more consideration is required in weighing up the choices South Africans are faced with. The answer is not having more savings options to choose from but rather being better at choosing. Think about how confident and comfortable you are when it comes to making decisions around your savings and investments. For most South Africans, delegating investment decisions to professionals is one way their savings are prioritised when everything else seems to be a priority.
- Dotting your i’s and crossing your t’s
Good governance means having the right people, processes and systems behind your savings. Investors stand a much better chance of realising better investment outcomes through well-managed savings.
- Time in the market
Time spent invested in the market is much more important than trying to time the market. Changing an investment strategy that is designed with the long term in mind because of short-term volatility often ends in missed opportunities or even losses.
- Fees
Ongoing charges can affect how much investment return investors are actually pocketing on their investment, so cost containment is critical to the long-term success of any investment strategy. Consider investment solutions from providers who have leading positions to negotiate and push down investment fees to ensure you are getting the best deal. Transparency of fee disclosures and an understanding of how they are structured in your best interests are also important.
With a multi-management approach, multiple and complementary asset managers are blended across different assets, styles of investments, and even regions within one overall portfolio. The scale of multi-managers typically means that they have the time, resources and expertise to conduct asset manager research, portfolio construction and risk management on behalf of investors. All this acumen can help take the hard work out of the savings management function and build well-diversified, high-quality and cost-effective portfolios so that investors do not have to.
“The times may have changed, but sound investment principles haven’t and still apply today,” says Fontanella. Investors who remain calm, stay invested and rededicate themselves to their long-term goals are better positioned to achieve future investment success.
“We were pleased to see that most of our clients invested in our portfolio solutions during February and March 2020 remained committed and invested through the turbulence. Less than a per cent of investors across our broad-based membership elected to abandon their positions when the market crashed at the start of the Covid-19 pandemic,” explains Fontanella. “Having access to the right professional advice at the right time and a multi-management investment approach that links the management of savings to comfort levels was key over this period.”
