UNDERSTANDING INVESTMENT RISK

As a Certified Financial Planner®, I am often surprised at how little investors know about their portfolio’s risk - its measure of volatility. While clients may understand their investment’s performance, what is often ignored is the amount of risk that had to be incorporated to achieve the outcome.

Investors who have too much exposure to a specific asset class (such as property) can find themselves at the mercy of enormous levels of volatility during times when that specific asset class is out of favour.

As at 22 February 2021, SA’s property index, the ALPI, was down 27% over the past 12 months.

Investors with a large exposure to property currently find themselves in the unenviable position of having to ‘sit tight’ while the effects of drawing an income from an underperforming asset wreak havoc on their retirement portfolio.

According to Nobel Prize laureate Harry Markowitz, “Diversification is the only free lunch”.

At Cooke Fuller Wealth Management, we pride ourselves on our ability to compile bespoke, diversified, portfolios.

Over the years, we’ve learnt about the pitfalls associated with being too heavily exposed to a specific asset class or sector, and have grown to understand the importance of generating risk-adjusted returns (generating satisfactory returns while paying meticulous attention to risk).

Our collective knowledge of the investment process, with the assistance of household name asset management companies, has helped us to build a strong and loyal base of clients who appreciate our adherence to traditional values, and sound investment processes.

– Adrian Fuller, director, Cooke Fuller Wealth Management (Pty) Ltd