THE start of a year is synonymous with reflection of the year that was and developing of new goals and plans for the year ahead.
The same can be said for wealth-building strategies, as an astute investor will likely be using this time to update investment mandates in order to ensure that the funds included in their portfolio effectively match their specific investment objectives.
This is according to Hywel George, director of investments at Old Mutual Investment Group, who says that there is no one-size-fits-all when it comes to selecting the right fund to invest in, as the optimal selection will differ depending on what the investor is looking to achieve with their investment.
“Each fund will have a specific risk profile, investment horizon and asset allocation, uniquely constructed to meet different investment objectives.
“When reviewing investment plans, investors should therefore ensure that they allocate capital to funds that are aligned with their specific investment goals.”
According to George, the economic and investment environment can also impact an investor’s risk appetite.
While 2016 was a tepid year in terms of growth for South Africa, 2017 is expected to be better, with many of the shocks experienced over the past few years having waned, such as load shedding, the commodity price collapse and the rand slump.
He explains that a fund’s risk profile is essentially a gauge used to match an investor’s needs to their willingness and ability to take risk.
“A risk profile is based on historical performance and asset allocation, and serves as a projection of potential future volatility. These profiles are clearly stated in all factsheets funds, ranging from ‘Low’ to ‘High’.”
George says that other factors for investors to consider when selecting a fund is the type of exposure that they are seeking, as funds will differ in terms of asset, sector and country allocation.