Invest in Growth

Invest in Growth

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If you are left feeling somewhat confused about what happened in the investment arena during 2012, then you’re probably thinking straight.

Who would have believed that at the time of printing, with one month left of 2012, the South African All Share and US S&P indexes were up over 15%.  Even more astonishing is that the German market (DAX) was up 26%.

If you agree this all seems very confusing, then international markets are even more of a puzzle. They were all up, yet the economic news from the UK, US and Europe appeared to be at an all time low.

This all supports the view that one cannot time markets. Growth can only be achieved by holding quality for the long term. It’s time in the market that counts, not trying to get market timing right.

Investing in property shares

It’s the same with property, which has had a torrid few years, yet the property funds in which you can invest have shown an average 22% growth. The question can be asked, why buy property to let, with all the associated hassles of tenants and maintenance, when you can buy quality property funds giving yields of between 6,5% – 7,5% without all the burdens.

If you’re invested through the appropriate structures, it’s cost effective to move between different shares or unit trusts when the need arises. There is a belief that the best performers of yesteryear are the ones to stick to. This isn’t necessarily true.

 

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Investment experts change jobs the same way that others do when a better offer is made, and so a poor performing fund may bring in an investment manager from another institution, as improved performance is vital to attract investment.

Time in the market

Don’t just remain in an investment for the sake of it. Regularly review your asset allocation in equity, property, bonds and cash, and don’t neglect what is at the moment the whipping boy of the western world, namely offshore markets. Analysts confirm that there’s value in quality companies elsewhere in the world. Unfortunately, what they are unable to tell us is when the performance may show great rewards.

I reiterate: it’s not about timing, it’s about patience. No one is going to ring a bell when its time to invest offshore.

Align investment to your goals

In 2013 it’s important that investors understand their investment objectives.  Are they looking for growth in the long-term or do they need income or perhaps a combination of both? If it’s income they require, then there is no better place to invest than here in South Africa.

This is supported by the amount of money which flowed into our bond market this year. On the other hand, younger people looking to create wealth need to be growth orientated, or their objectives will not be achieved. Align your investments to achieve your long-term goals.

My advice to investors for 2013 is to take a fresh look at each aspect of their financial plan.  This includes their will and trusts, business agreements, estate, tax and retirement planning. Look into your asset allocation, and make sure you are geared for an investment structure that suits you.

Simply put, those in need of short-term money should be invested in secure and certain investments, with no risk, but any investment in excess of six years should be invested for growth. Don’t worry about market fluctuations because these give you greater opportunity to invest at lower prices for the long-term future.

Bryan Hirsch
BRYAN HIRSCH has been in the financial services industry for 47 years and is a director of Bryan Hirsch Colley & Associates. He has written two books, the first Bryan Hirsch’s Guide to Personal Finance and more recently, Steps to Financial Freedom. Bryan has written for many of South Africa’s top financial and business publications, has been a weekly guest on Radio SAFM for 18 years, and has his own weekly TV show You & Your Money on Summit TV.