New Year’s res­o­lu­tions to boost your in­vest­ments

Start with these five steps to en­sure that you man­age to stick to your fi­nan­cial res­o­lu­tions this year.

Finweek English Edition - - MARKET PLACE - Edi­to­rial@fin­week.co.za Schalk Louw is a port­fo­lio man­ager at PSG Wealth.

christ­mas dec­o­ra­tions have been re­moved from dis­play win­dows, hol­i­day re­sorts and coastal towns are much qui­eter and 2017 has of­fi­cially be­gun. This is also the time when most peo­ple com­pile a list of res­o­lu­tions for the New Year. “I am go­ing to lose weight” and “I want to quit smok­ing” re­main among the favourite res­o­lu­tions every year. The re­al­ity, how­ever, is that without proper plan­ning and strict dis­ci­pline, your res­o­lu­tions may very well turn to dis­ap­point­ment for yet an­other year.

The same fo­cus and ded­i­ca­tion you ap­ply to your New Year’s res­o­lu­tions should be ap­plied to your in­vest­ment strat­egy and sav­ings plans. For some this may mean a dream hol­i­day this com­ing De­cem­ber af­ter spend­ing the hol­i­days at home last year, and for oth­ers it may mean some­thing more long term, such as plan­ning for that all-im­por­tant re­tire­ment.

These days, scores of ar­ti­cles list steps on how to lose weight or stop smok­ing, and I found it quite in­ter­est­ing to see how these very steps can be ap­plied to your in­vest­ment res­o­lu­tions for 2017.

1. DO IT FOR THE RIGHT REA­SONS

The pur­pose of this step is usu­ally to shock you. “If you don’t start pay­ing at­ten­tion to your weight im­me­di­ately, you may soon have to con­tend with high blood pres­sure or high choles­terol, which can lead to heart at­tacks and more”, or “If you don’t stop smok­ing to­day, the prob­a­bil­ity of you con­tract­ing an ar­ray of lung dis­eases, in­clud­ing lung can­cer, in­creases dras­ti­cally”.

South Africans in gen­eral do not be­lieve in set­ting aside cap­i­tal over the longer term. In the ar­ti­cle The A-Z of in­vest­ments in 2016 (15 De­cem­ber edi­tion), I men­tioned that sav­ings as a per­cent­age of in­come cur­rently stands at -0.4. That means that for every R100 earned monthly, the av­er­age South African earner is left with mi­nus 40c in their pocket. Trea­sury re­cently re­leased some shock­ing sta­tis­tics that showed that fewer than 10% of all South Africans will be able to re­tire com­fort­ably and that 6m work­ing South Africans have no ac­cess to an em­ployee pen­sion fund. If you can ad­mit with ab­so­lute cer­tainty that you will not be able to make ends meet with the max­i­mum el­derly gov­ern­ment grant of R1 500 a month al­lo­cated to cit­i­zens above the age of 60, you will do well in fol­low­ing the steps be­low.

2. SET GOALS

Know what you need to achieve and iden­tify spe­cific rea­sons why reaching those goals will ben­e­fit you, whether it’s an es­ti­mate of costs for your next De­cem­ber hol­i­day or how much you will need to re­tire com­fort­ably. In most cases, it is ad­vis­able to con­sult a fi­nan­cial ex­pert in this re­gard.

3. PLAN­NING TO REACH YOUR GOALS

This is where most res­o­lu­tions fly out the win­dow. The mo­ment you re­alise that you will need to cut back on your cus­tom­ary Wed­nes­day or Fri­day evening so­cials in or­der to lose weight or save money, such res­o­lu­tions quickly be­come some­thing you’d rather set aside for next year’s list. The key to suc­cess lies therein that your plans should be real­is­tic and your goals achiev­able. For some it may be im­pos­si­ble to start off by sav­ing R1 000 a month in or­der to reach the goals you set in step 2, for ex­am­ple, so start with R500 in­stead, with the goal to in­crease that amount every year. In­vest­ing R1 000 a month at a growth rate of 10% a year over a pe­riod of 20 years will give you more or less the same to­tal as in­vest­ing R500 a month, with an an­nual in­vest­ment es­ca­la­tion of 10%, at the same growth rate.

4. GAIN SOME SUP­PORT

Don’t tackle your New Year’s res­o­lu­tions alone. In­volve your fam­ily and friends and make sure they are well aware of your res­o­lu­tions. Of course it would be much more fun to dine out or buy some new “toys” with your friends, but those ex­tra sav­ings can make a huge dif­fer­ence to your in­vest­ment’s fu­ture value. By stick­ing to your res­o­lu­tions, you may very well in­spire your friends and fam­ily to fol­low in

your foot­steps.

5. MON­I­TOR YOUR PROGRESS

This doesn’t mean that you’re done with your sav­ings strat­egy. Check your in­vest­ment state­ments reg­u­larly in or­der to de­ter­mine whether your in­vest­ments are show­ing suf­fi­cient com­par­a­tive growth, and more im­por­tantly, to keep track of your in­vest­ment costs. A small sav­ing in in­vest­ment costs can lead to a huge boost in your in­vest­ment per­for­mance over the long term. Also en­sure that you get into con­tact with your fi­nan­cial ad­viser at least once a year to dis­cuss your in­vest­ment strat­egy and any pos­si­ble changes to your fi­nan­cial sit­u­a­tion. Wish­ing all read­ers a pros­per­ous 2017. May all your New Year’s res­o­lu­tions turn out to be ex­tremely suc­cess­ful.

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