What drives your investment’s performance?

To reach your financial goals in life you will need your investments to perform at the highest rate possible. But what drives investment performance?

 

The Four main contributing Factors that drives your investment performance is as follows:

 

1 – Your Contributions
This is by far the most important factor to reach your financial Goals. If your goal is R 1 million and your contributions only a R 1000, returns can be 100% per year and costs 0% , you won’t be able to reach your goal.
Only 6% of South Africans can comfortably retire and the main contribute to that is our countries low savings ratio.  It is also very important to mention that this factor, the amount you contribute is entirely in the hands of the investor.

 

2 – Asset Allocation
The different Asset classes you are invested in will give you different return profiles. Cash will give you a solid lower return profile and stocks will give you a higher but more volatile return. The time frame and objective of your financial goal needs to be taken into account.
The decision to invest locally or offshore also have a big impact on investment performance.

 

3 – Fees

The higher a cost for the investment does not necessarily imply a poor return, nor does low cost imply a good return. It is important to compare apples to apples and if you can get for example Allan Gray balanced fund cheaper at one company as at another company, the lower cost will boost your investment performance.

 

4 – Investment Structure

It is important to optimize a clients financial plan to use the correct investment structure etc. Retirement annuities, Endowments or Tax free savings.

The right structure protects investment return and generates a boost by making sure that taxes don’t eat away more of client’s wealth than absolutely necessarry.

 

If you have any questions about the above statements or if you need any help please feel free to contact us.

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