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Investment Strategy
Friday, December 1, 2006
Common sense

It is important to get expert advice from a licenced financial planner before embarking on a lifelong strategy for saving and securing your future well-being.

But it does not take an expert to use some common sense as a starting point.
Generlly any decision about investing should first be based on what else is in your portfolio (should you have started one already); your age and future plans. Essentially diversification is best.
Secondly, equities long term have proven themselves over 100 years, and will always be a good bet. But this carries a caveat: your time horizon, when adding shares to your portfolio, should be at least 10 years, the longer the better. Such equity investments should never be subject to any emergency financial need – that should be the role of a term deposit account. Selling shares under stress is a very bad strategy.
For most of us, buying into equities is best achieved through acquiring unit trusts. A regular monthly contribution is a good strategy.
Investors should also be prepared to see their shares fall in value substantially without flinching. History has proven there will always be market corrections; and, severe though they can be, the marekt always recovers over time – always.
Avoid any urges of greed. You can never sell at the top or buy at the bottom; if you could everyone would be doing the same thing and the market would end up staying flat.
Try to avoid buying into past performance. If the figures are good, then chances are it is already too late to do anything about it.
Diversification may aso include offshore counters. I say ‘may’, because there is some truth in investing in the marekt you know, and in the market of your home country: South Africa. Experts do variously suggest that between 10% - 30% of your portfolio should be in foreign assets, however; although I would suggest getting the local market portfolio properly balanced first before worrying about offshore investments. They can be filtered in over time later.
Controlling your debt, accelerating your bond repayments and building some cash reserves in term deposits should not be overlooked.  By Nigel Benetton

Copyright © Insurance Times and Investments® Vol:19.6 1st December, 2006
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