This feature is sponsored by PSG Wealth. Send your financial queries to [email protected]
HOW TO START MY WEALTH JOURNEY?
I am a young female interested in investing but feel unsure of how to get started on the process. Can you provide guidance on how to go about this new journey?
Name withheld
Chrisley Botha, wealth adviser at PSG Wealth, responds: Wondering how to start this process is normal when you’re new to investing. Although sometimes the financial world can be confusing, it is important to make use of a good financial strategy. I would suggest you prioritise the following tips for successful investing.
Goals: Identify what your goals are. Are you saving toward retirement, or are you looking to invest your money for other needs? Bear in mind that your priorities and goals might change over time, and your financial plan needs to adapt accordingly. That’s why it’s best to work with a financial planner who can assist you in keeping your plan on track throughout.
Balance: Finding a balance between risk and return can be seen as one of the most important skills for an investor. One step toward this skill is to know your risk tolerance and understand the performance of assets under different economic conditions. Generally, it’s best to diversify your investments and have some exposure to stocks, bonds, cash, and property, as this diversification allows you to spread the risk.
Costs: The costs and fees can affect the returns of your investment, so the lower your costs, the more you will save in the long run, and remember to choose tax-efficient products where possible.
Discipline: Stay on course with your plan. Working alongside a financial adviser will help you formulate a successful investment strategy.
LIFE AND HEALTH COVER FOR A SINGLE MOM
I’m a mother of two and recently divorced. I’d like advice on what life cover or alternative policies I should look at to cover myself and my family in case of an emergency.
Name withheld
Kim Runzler, financial planner at PSG Wealth, Johannesburg, responds: If there’s one thing the pandemic has taught us, it’s that the unexpected can happen at any given moment. And when it does, it’s vital to keep your income flowing and your dependents provided for. The correct life insurance, critical illness and disability cover is a central part of your and your family’s financial planning and safekeeping.
Medical aid: Medical costs can often be exorbitant, especially if you have children. These costs can often be managed efficiently through gap cover, generic medication, managed care benefits (chronic illness) and designated service providers to help make the process more affordable.
Disability cover: Losing your ability to earn an income through disability is a particularly serious risk.
Critical illness cover: Among many other illnesses that are covered, this is especially important for what is known as the “big three” critical illness claims – cancer, heart attacks and strokes are high risk illnesses, so ensuring that you’re covered could save you and your family the financial stress when needing to deal with critical health issues.
Life cover: Leaving your dependants with adequate life cover will eliminate the extra financial burden, in what would be an already difficult time for them.
Working with a qualified financial planner will assist you in making the right choices when it comes to all of the different policies and options.
USING UNIT TRUSTS TO INVEST OFFSHORE
How can I increase my offshore investment exposure through unit trusts?
Name withheld
Anet Ahern, CEO at PSG Asset Management, Cape Town, responds: First, you need to remember that offshore investment should always be considered as part of an overall balanced portfolio. The right level of diversification will always depend on each investor’s unique needs and risk profile, and it is best to consult with a financial adviser as there may also be alternative legal and financial planning effects for you to consider.
Where you want to consider additional offshore exposure for your discretionary investments, I would recommend that you be particularly selective about where you invest at this time.
We have seen some markets, and specific shares and sectors within these, (like mega-cap tech stocks in the US) which have traded at extreme valuations, and subsequently pulled back sharply. However, we do not think that all imbalances have fully unwound as yet.
As such, we anticipate further volatility, and “buying the dip” on what you feel you may have missed out on (the past decades’ winners) may not be the obvious course of action, because large scale changes in the investment landscape will require investors to think differently and not just invest in what has worked for a long time … up to the end of last year. We think the environment that lies ahead will look materially different to that of the past. Make sure your offshore portfolio is properly diversified with investments that are more likely to withstand or benefit from the challenges of higher inflation and higher interest rates.
I WANT TO CANCEL MY INSURANCE
I’m thinking of cancelling my short-term insurance cover, as it seems to be an unnecessary expense. Why should I keep it?
Name withheld
Almariè Büchner, adviser at PSG Insure, Centurion: Although short-term insurance is viewed as a grudge purchase by some, it should be considered by anyone who has valuable assets or items that they cannot afford to replace when disaster strikes. Short-term insurance offers a safety net. It provides a measure of security when unexpected events arrive, be they man-made or natural occurrences. Insurance helps to manage your risk by covering and protecting your assets and valuables in the unfortunate event of damage, therefore, enabling you to save thousands of rands that would have been needed to replace the lost or damaged items. If you don’t have insurance in place, you need to save an amount equivalent to that of your valuables to replace them, and in most cases saving even huge amounts a month will not enable you to replace the loss due to the increased value of items and other factors affecting the value of an item or asset. Speak to a financial adviser to help ensure you select the right level of cover, tailored to your needs.
PERSONAL FINANCE