Welcome to 2023. We wish you a prosperous year filled with health, happiness and success.

To support you, I’d like to share some financial tips for your interest, which may help you given the current state of the economy and markets. If any of the following interests you and you’d like to explore our professional opinion, please reach out as we’d be delighted to help.

• Review Your Goals for the New Year

It is a healthy exercise to review your goals at regular intervals, but this is especially important today. A research study by Morningstar called “Mining for Goals” shows that as much as 71% of people change their top 3 goals by doing a simple review exercise, which is quite remarkable and appears especially likely as we come out of the pandemic.

• Focus on Purchasing-Power After Inflation

Inflation has become a major issue for many households. By focusing on your purchasing power, you are successfully thinking in what we call “real terms” (which adjusts for inflation pressures). Reviewing your budgets and retirement funding needs are two worthwhile pursuits, but it is also worthy of reviewing portfolio progress to ensure it has a fighting chance of beating inflation.    

• Ask Yourself… “Am I Nervous or Fearful?”

Every investor will endure downturns on their journey, yet it is the ability to reflect and learn from the lessons that make for sound investing. During challenging times, it is worth marking down the lessons, including the fears or questions that drove your thinking. Behavioral coaching can add meaningful value – acting as a steady hand when you need it.

• Review Tax Arrangements

All too often, investors think in pre-tax terms. Whether we look at our earnings or our investment returns, many of us fail to consider tax implications. It is always a good idea to think about your tax structures to help increase after-tax returns.

• Portfolios Matched to Goals

Meeting goals is an individual experience and tracking the JSE FTSE ALL SHARE INDEX is not for everyone. By thinking through your goals and financial position individually, without comparison, you often get the best picture of financial health. Portfolio combinations that are matched to your goals and life milestones can be effective, but some people struggle with the complexity. We can help with any portfolio matching needs or queries.    

• Assess the Best Options for New Money

We always want to keep your financial aspirations and risk tolerance in mind, with different investment options available. Whether you want to “sleep at night” or “capture the discount”, we might be able to guide you through some of your best options.

• Just Rand-Cost Average

Sometimes, we can be guilty of analysis paralysis, or simple overthinking. By taking action in a building-block type approach, we can gradually break down our mental barriers and potentially increase the probability of success in reaching our goals. Rand-cost averaging means topping up your existing holdings on a gradual basis, which is often statistically better than doing nothing.

• Rebalance with a Total Viewpoint

As markets move, we should adjust. Rebalancing is not fool proof, but it can help manage risks, avoiding unwanted market drift. It is mostly used at the portfolio level, but you can do the same at a personal level – looking at everything from property to cash, and the ratios of each that you hold.

Summary

The above ideas are intended to nudge good investment behaviour and make sure you’re considering a broad perspective on your financial journey. We hope you found them insightful. To reiterate, if you’d like our professional assistance in implementing, we’d be delighted to help.

Raoul Gordon

Risk Warnings

This commentary does not constitute investment, legal, tax or other advice and is supplied for information purposes only. Past performance is not a guide to future returns. The value of investments may go down as well as up and an investor may not get back the amount invested. Reference to any specific security is not a recommendation to buy or sell that security. The information, data, analyses, and opinions presented herein are provided as of the date written and are subject to change without notice. Every effort has been made to ensure the accuracy of the information provided, but Morningstar Investment Management South Africa (Pty) Ltd makes no warranty, express or implied regarding such information. The information presented herein will be deemed to be superseded by any subsequent versions of this commentary. Except as otherwise required by law, Morningstar Investment Management South Africa (Pty) Ltd shall not be responsible for any trading decisions, damages or losses resulting from, or related to, the information, data, analyses or opinions or their use.

This document may contain certain forward-looking statements. We use words such as “expects”, “anticipates”, “believes”, “estimates”, “forecasts”, and similar expressions to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially and/or substantially from any future results, performance or achievements expressed or implied by those projected in the forward-looking statements for any reason.

Morningstar Investment Management South Africa Disclosure

The Morningstar Investment Management group comprises Morningstar Inc.’s registered entities worldwide, including South Africa. Morningstar Investment Management South Africa (Pty) Ltd is an authorised financial services provider (FSP 45679) regulated by the Financial Sector Conduct Authority and is the entity providing the advisory/discretionary management services.