Spring is in the air and along with the warmer weather and longer days, there is the blossoming possibility of having a comprehensive plan for your future financial wellbeing in place.
In this Newsletter:
- Choosing a Financial Advisor
- Stay on course with your Investments
- Saving for Emergencies
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CHOOSING A FINANCIAL ADVISOR
Here are five suggestions on how you can secure your financial wellbeing:
- Cost of their services
If information on the cost structure of a financial advisor’s services isn’t available on the website, it is important to ask about the initial planning fee and the percentage charged for assets under management. Asking this question not only gives you an idea of how much these services will cost you, but it is also a good way to gauge the financial advisor’s incentive to give you good wealth management advice. - Services provided
It is important to determine whether or not a financial advisor can only assist you in advising on investment options or if they offer comprehensive financial planning that includes retirement, insurance, investment options, estate planning and more. Your financial needs are unique and you have to choose a financial advisor whose offering best fits your needs. - Sample financial plan
A wide variation of financial plans are available as there is no set structure on the presentation of a financial plan. You might need an in-depth analysis of your financial situation which some financial advisors might offer you without any explanation of what it means. You will most likely need an explanation of your analysis and suggestions on what the next steps to take will be. - Investment approach
Depending on your preference of investment philosophy, it is important to ask the financial advisor what his/her personal investment philosophy is – whether or not, in the case of low-cost funds, they make use of actively managed funds or passive investments. You need to understand whether the financial advisor will give you investment advice that is consistent with your unique risk tolerance and investment goals. - Contact with clients
Asking the financial advisor about the frequency of his/her client visits and feedback is really important and will give you better insight into the kind of support you will be getting from them. Some people only want yearly reports or quarterly check-ins, and depending on how involved you require your planner to be, for instance if you need your advisor to explain things to you, you might need to consider the services of a financial advisor who contacts you regularly.
Questions to ask your financial advisor:
- Is it a good time to make changes to my investment portfolio to suit my long-term goals during this time of market volatility?
- Am I still on track to meet my personal goals?
- How do I focus my decision making on my goals instead of current trends in the market?
STAY ON COURSE WITH YOUR INVESTMENTS
WEALTH INSIGHT
What is downside protection?
The use of an option or other hedging instrument in order to limit or reduce losses in the case of a decline in the value of the underlying security. Downside protection often involves the purchase of an option to hedge a long position. Other methods of downside protection include using stop losses or purchasing assets that are negatively correlated to the asset you are trying to hedge.
Definition: Investopedia
South Africans were made to watch as the Rand plummeted to a new all-time low against the US dollar following China’s stock market collapse on Monday 24th August. The day aptly dubbed “Black Monday”, lead to massive financial losses suffered by global stock markets, causing great market turmoil and investor uncertainty.
Global markets, the JSE included, saw a strong recovery to the market by the 28th of August but still started the new week nervously, still feeling the residual impact and pressure on the market as investors anxiously await economic indicators from China that could potentially have a strong influence on share prices.
The current trends in the market may be unnerving to investors, but as has been foreseen by asset managers, there has been a considerable market correction.
What does this mean for investors?
A good financial plan with long-term investment goals and a solid strategy in place will ensure that you are not on shaky grounds within the market turmoil. If, as an investor, the uncertainty brought on by the volatility within the global market had a negative impact on your investment projections, it is advisable that you revise your investment goals with your financial advisor and consider making use of downside protection.
As an investor you shouldn’t be basing decisions on investments on the recent developments within the market and holding onto the belief that the developments will persist. Instead you should be aiming to rebalance your investments and place trust in the long-term investment strategy you have in place. The point of investing is opening yourself to a degree of risk – without risk, the reward won’t be as great. Regardless of what you choose to do with your investments at this point in time, ensure that the way you choose to continue your investment serves your long-term investment goals instead of focusing on what is happening in the global market.
SAVING FOR EMERGENCIES
Protect yourself from life’s unexpected turns by having an emergency fund in place that is easily accessible. Your personal circumstances determine the size of your emergency fund, and industry experts suggest that you should have enough money in this fund to cover anything between six months to a year of your expenses.
Residential Expenses: Include savings in your emergency fund for housing expenses, insurance and utilities.
Living Expenses: This may include anything from food to household supplies.
Healthcare: Include the cost of your medical aid into your emergency savings fund as well as extra in preparation for unforeseen medical emergencies.
Debt Repayment: Monthly repayment amounts for credit cards and other debts should be included into your emergency savings fund.
Remember to only make use of your emergency fund in case of emergencies and not for unnecessary purchases and frivolities.
The above mentioned are merely suggestions on items you need to save for in your emergency fund, you have your own personal circumstances and should apply your emergency savings total to your own unique needs.
