Aligning your money with your risk appetite and goals

To help you decide where and how to invest your money, consider the following…

Scrutiny of the multitude of investment options available to the public is enough to make even a seasoned market analyst or investor feel more than a little uncomfortable.

Options are plenty – numerous unit trust funds, equities, investment vehicles, saving schemes, investment trackers and so much more. Even after having made an informed choice when investing, you may still wonder if you did the right thing.

Apart from the mentioned uncertainty, the number of investment options also multiply your risk of investing in the wrong type of asset for your needs and your investment goals.

To help you decide where and how to invest your money, consider the following:

Beating inflation

The primary goal of any investment is to beat inflation.

Inflation drives up the cost of all goods and services, and you need to make sure that your money grows in line with, or better yet, more than inflation. This will mean that the money you invested will still be able to buy the same goods or services many years hence, even if those goods and services have become more expensive over time.

Allocating your assets

With your primary goal of beating inflation as the starting point, the next step is to decide into which of the four major asset classes you want to invest your money.

The four asset classes are:

  • Cash, including money markets, savings accounts and fixed deposits: These are short-term investments with a very low level of risk. As expected with low-risk investments, the returns on these investments are also very low and may even be negative, when you consider fees and inflation. Growth on cash is in the form of interest which is taxable. When assessing the return on cash you need to also be cognisant of the effect of taxation. Cash can, however, be used to park funds for a short period, while you plan the next move or wait for a specific market cycle to pass.
  • Bonds: Bonds have various levels of risk and are good medium- and long-term investments. Bonds include sovereign (bonds issued by a government) and corporate (issued by listed companies) bonds. 
  • Property: This is a broad category of investments that includes listed property funds – such as Property Unit Trusts (PUTs) and Real Estate Investment Trusts (Reits) and residential investment property. Residential and investment property would typically not be included in unit trust, but would be a part of the inventor’s other assets.
  • Equities: Equities or direct shares in listed companies, are often seen as riskier than the other asset classes, but that is only the case if the funds are investment for short periods. Over longer periods (6 years or longer), equities have historically returned superior returns, despite greater volatility over the short term.

Your decision on where to invest your funds should be guided by your financial goals and your investment timeframe. If you have aggressive growth goals, you will need an increased tolerance for risk. On the other hand, you may want to preserve your capital and have it easily accessible, which may reduce your growth potential.

Your investment goals may be the single most important factor affecting how much risk you need to take, which in turn affects which asset classes you ultimately invest in.

With this in mind, it is of the utmost importance to make this decision supported the right advice, which is why it is advisable to choose an independent, fee-based financial advisor. Advisors from Ascor Independent Wealth Managers fit this description.

Independent advisors will advise you based on an informed view of the market and various assets and not with a focus on the fees and commission that are payable by investing in certain assets, ensuring that your decision regarding which assets to invest in will be given the attention it deserves.

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Martin de Kock

Ascor® Independent Wealth Managers


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