You take care of your mental and physical health, but what about your financial health? Elke Brink’s advice is going back to basics.
Looking back one year, so much has happened – and we have survived many challenges.
In January it might have felt a bit as if this year is only a prolonging of 2020, and yet the first quarter of the year has passed and here we are mid-April already.
Working from a combination of SA and Europe, I think SA is currently in quite a fortunate situation, being very much “back to normal”.
Here wine farm visits and many face-to-face meetings are possible once again, while schools have (finally) reopened. The story is looking much different in Europe, with Germany for example experiencing the equivalent of a “level-5” lockdown in SA terms since November, and the end is barely in sight.
I’m hoping it can stay this way in SA and the vaccination process proves to be effective. In a recent newsletter by Adrian Gore, CEO of Discovery, he says that they will start rolling out vaccinations as soon as they manage to receive vaccines of their own, which gives me hope for SA, and to be very honest, just proves our resilience once again.
One topic that has surfaced is fatigue: Covid-19, Zoom, and mental fatigue. We have possibly lived through a once in a lifetime experience. But reading one more article about Covid-19 or sitting in one more virtual meeting is just getting a bit too much for all of us.
What if the same is happening to our investment portfolios? Let us call it finance fatigue.
We are constantly being flooded with different sources of information. Active against passive investing; should we be afraid of changes to the Pension Funds Act’s regulation 28; are we investing enough offshore? Should we invest in property in the current interest rate environment? And of course … Bitcoin.
Perhaps we have all become a bit overwhelmed by this and perhaps reading about how to structure your investment portfolio in an economically challenging time is not the easiest thing to do either. But just like taking care of your mental and physical health in this time, the same applies to your wealth.
Before we start talking about asset allocation and investment vehicles, let us start with some of the basics.
How are you managing your income?
If you are not prioritising saving the right amount monthly towards investment purposes, you should not be debating asset allocation yet.
As a start, you need to decide on the actual amount that you are willing or able to save to reach your goals. A further question you must ask yourself is: What is my behavioural thinking pattern towards saving?
As an example, each month, we pay marginal income tax on our income earned. This is compulsory and we do not even think about it. We are so used to paying taxes every month (and many other things), but we are not prepared to put aside an amount for our own wealth and future.
Consider how different your financial position would have been if from day one, you had made a conscious decision to save the same percentage that your earnings are being taxed at.
Having done something like that would have ensured a completely different effect on your wealth over the long term as your behavioural pattern towards saving would have been well established. We need to review our way of doing “life” – and rewrite our own wealth success story.
Once we have done this, we can refine the allocation to specific investment vehicles, and consider tax efficiency and asset allocation.
I would advise working with an unbiased wealth adviser from day one, as this will ensure you have the benefit of knowing all the options for your portfolio structuring from the start, ensuring a focused approach to setting your goals.
If you are not working in the investment industry, chances are you have a few balls to juggle already with a full-time job, family and perhaps a few hobbies.
Working with an advisor from the start helps to ensure that your portfolio enjoys a focused, objective approach suited to your situation – finance fatigue eliminated.
Elke Brink is a wealth advisor at PSG Wealth.