Know and keep your goals to earn high returns

2010-07-10 13:09

A few days ago I received a market analysis report from Stanlib

for the first quarter of this year.

The report looks at the various asset classes: listed property,

shares, bonds and cash, which are the primary means of ­investment.

In addition to confirming the unstable markets, the report shows

that stable assets, such as listed property, took a slight dip during the first

three months of this year but has since shown ­progressive growth.

Similarly, bonds started the year negatively but have held steadily

above the growth line.

Cash, through fixed ­deposits and money ­markets, has grown by

­between 5% and 10%.

Shares have had a ­nightmarish three months.

The growth in cash can be attributed to the fact that in volatile

markets, most investors are driven into cash as a parking bay as it becomes more

difficult to time the markets and shares.

On the other hand, those investors who are sitting with cash could

be missing an opportunity to buy shares cheaply.

This report reminded me of the importance of the time horizon as

a ­critical element in any ­investment strategy.

Shares have always ­out-performed all other ­asset classes over the


Financial goals and ­investors’

present financial positions should inform the investment strategy.

To achieve higher returns, the

investor needs to be financially prepared by having enough money for

emergency situations.

This will allow their ­investments to grow ­without raiding the

reserves because they are in a hurry for quick returns.

Goals – such as children’s

­education, saving for a specific purpose and retirement – should be what

makes investments work for you.

In the course of my work, I have established that investors tend

to lose sight of their goals and ­simply opt to

satisfy a want while their needs are never met.

Some investors go into investments simply because it is

fashionable in their circles rather than for personal financial


A better understanding of the composition of your portfolio and how

it ­impacts on your goals can help allay fears of

a loss.

Investors tend to be ­wary of short-term losses ­simply because

they still do not understand how the various asset classes can be ­employed to

achieve their objectives.

Investors should consult a financial advisor who will help them

define their goals and identify an investment

strategy that will best suit them.

» Diale is a financial

planner. He can be contacted on 078 775 0802

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