I have more than R5 million to invest. Any suggestion or ideas with regards to how to double this? As you know, the return on interest and the banks have dropped. I am currently overseas but will return to South Africa this year.
There are a few details regarding the fund value I will have to know to be able to advise appropriately, but for the sake of answering, I will address a few principles. Depending on your personal situation the best investment option might be something different.
It will depend on your current age, the time frame you have with the investment, where the money is coming from, and whether the money is currently in South Africa or abroad.
Let’s start with asset allocation – if you want to enjoy higher returns in any investment, you will need to have exposure to growth assets (equity exposure). I believe in optimising an ‘all-weather’, resilient portfolio because we need to diversify among asset classes. One asset class is not a substitute for another.
They behave differently in different market cycles and should therefore be combined for the best performing portfolio consistently over time – by including cash, bonds, property, local and global equity exposure.
The growth assets will experience the most volatility in your portfolio, but they will also ensure the double-digit returns you are seeking over time.
Therefore, the only thing you will need is time. It’s not about timing the market – but time in the market.
The graph below illustrates the different returns the various asset classes have enjoyed over the different time frames:
Depending on your time frame and risk appetite, you could invest the majority of the portfolio in equity exposure.
If the funds are located in South Africa, and the funds are discretionary (not in any retirement vehicle), you will have the flexibility of increasing your equity exposure, but more importantly your offshore equity exposure too.
However, if the funds are in a retirement vehicle (such as a retirement annuity or pension, provident or preservation fund) you will have to abide by Regulation 28 of the Pension Funds Act, and will therefore be limited in terms of the maximum offshore and equity exposure.
If you are planning to return to South Africa, I would advise keeping the domicile of the investment in SA, as you will simplify your tax and estate duty by keeping the funds in your local portfolio, assuming you will at some point need these funds to live from at retirement. I would, however, advise diversifying offshore within the investment as well. This will give you the benefit of diversifying in terms of the economy, political environment, currency and fund managers, and provide access to many more listed shares and available funds to invest in compared to SA.
The final recommendation I would make when you have allocated your investment is to continue remaining invested, even during volatile times. The graph below illustrates how your investment value would have been different should you have missed just a few of the best days in the market: