Befriend the Trend:
coupled with historically depressed interest rates, is changing investor sentiment towards equities. Despite the wounds of 2008 still being fresh in our minds, we are witnessing a period in which investor confidence is being restored by positive growth within the equity sector. So, is the time right to increase portfolio equity weighting?
Paolo Senatore, chief investment officer at Ashburton Investments, says: “If you take the last year or so equities have been much stronger than, for example, the bond market. The experience over the last few years has actually been quite positive.”
The idea of outstanding returns on top of possible dividend income needs to be weighed in conjunction with the risky nature of an equity investment. But if someone fits into the right box and entertains the idea of making smart and sustainable equity picks then perhaps the riskier seas can be sailed with an element of safety...
It’s vital to be completely compl honest h o n e s t w when assessing the level of risk you would like your i nvestmen nvestment to be expose exposed to. Common sense s asset manageman ment principles princ apply here t too – have a plan in mind m as to what you w want to achieve and
consid consider your age, tolerance for risk, as well as your personal wealth position.
Anthony Katakuzinos, chief operations officer of Stanlib Retail, says: “It’s always important to have equity exposure. But the extent will depend on individual circumstances. The best way is through high-equity or low-equity balanced asset allocation funds.”
Katakuzinos says that equities in the long term give the best chance of growing your wealth over time and for making a decent return. For those that are able to deal with the volatility, “pure equity investment could be the ideal opportunity”.
He adds: “But what we have found is that people prefer to see less volatility. They prefer to leave the decisions to the professionals as to when it is ideal to up-weight or down-weight equities or move into different asset classes. High-equity balanced funds are generally regulation 28 compliant,
Smart, sustainable equity purchases are what investors need to be on the lookout for. It’s the companies that are able to generate healthy earnings on a consistent basis that are going to help you grow your wealth. Senatore believes it is perhaps not as important to look at which markets are attractive, but rather to look at which corporates are in the right space at the moment globally.
He adds: “Purchase those companies that you feel represent some kind of substance and sustainability of earnings. When you are facing markets with high valuation levels you really do need earnings to come through, because if they don’t, you are exposing yourself to downside risk.”
As far as picking the right person to manage your funds is concerned, it’s crucial to partner with an asset manager that has a proven track record of playing successfully in the equity markets. Fund fact sheets are available on all asset managers websites – read up on all the available options and decide which one suits you. Do your homework on the fund manager and ensure that their philosophy is one that you agree with.