Are you thinking about starting to invest your money? Many potential investors are tentative to pay for financial advice; perhaps you received some bad advice in the past? This is entirely understandable, but the reality is, can you afford not to seek professional advice about your investments? Not everyone has the experience and financial savvy to manage their own investment portfolios. If you already have an investment portfolio, when was the last time it was evaluated?

For first-time investors, please find explanations about investment management below. It’s worth reading as a refresher course for those of you who have investments, but you can scroll down to the investment evaluation section if you’d prefer.

What is investment management?

Investment management is the creation and maintenance of a financial portfolio. It can consist of various types of investments such as annuities, unit trusts, property and offshore investments.

Investment management also includes following and/or adapting an investment strategy, buying and selling investments, and managing the portfolio’s asset allocation. The different types of asset classes in which you can invest are:

  • Stock or equities
  • Bonds or other fixed-income investments
  • Cash or cash equivalents, such as money market funds
  • Real estate or other tangible assets
  • Futures and other financial derivatives

What are investment managers?

An investment manager is an individual (or company) that manages an investment portfolio for you. Investment managers develop an investment strategy to meet clients’ financial objectives and implement it to determine how to divide the portfolio among the different types of asset classes, such as stocks and bonds – the percentage of asset exposure will depend on the fund in which you’ve chosen to invest. The manager buys and sells those investments for you and monitors the portfolio’s overall performance.

How can I open an investment account?

Step one: Define your financial goals

Before you open an investment account, make sure that all your financial goals are defined. E.g. What is the purpose for investing, what’s your risk appetite and what’s your time horizon – are you saving for your child’s education, your retirement or an emergency fund? The answers to these questions will determine which type of investment will suit your needs.

For example, if you’re saving for retirement, consider a retirement annuity and complement it with a tax-free investment account. You have peace of mind that contributions to your RA will reap the rewards of compound interest, and a tax-free investment account allows you to save a tax-free amount of up to R500,000 in your lifetime. If you’re saving for an emergency fund, you will need the money to be easily accessible. In this case, consider investing in a Money Market – the funds earn interest and can be withdrawn immediately.

Step two: Speak to an independent financial adviser

Does all the above mentioned information sound overwhelming? No problem. Speak to an independent financial adviser. They are experts at looking at your financial situation from a holistic perspective and will help you draw up a financial strategy tailored to suit your needs.


Do you already have investments? Examine their performance to make sure they are meeting your objectives

Once you have an investment portfolio, you must examine your investments’ performance to ensure they align with your financial strategy. It’s suggested that you evaluate your portfolio annually to have a well-rounded view of its performance; based on this, review your decisions and think about making revisions if they no longer support your financial goals.

Here are three tips to help you determine the performance of your investments.

Evaluate your financial goals

Your financial objectives will change alongside personal circumstances. Perhaps you’re planning to marry and/or have a child. In these cases, you may need to access funds for the wedding and/or want to start saving for your child’s education. These personal milestones are the perfect time to re-evaluate your goals.

Compare your personal benchmarks with investment performance

Whenever looking at your investment portfolio, ask the question, ‘what are my financial goals?’ Your financial objectives define your personal benchmarks. Investments also have performance benchmarks, so you need to decide whether both are in sync with each other.

Let’s use unit trusts as an example.

Each type of unit trust (e.g. equity fund or balanced fund) has a benchmark that lets you judge how your investment performs against the intentional goal. Unit trusts are investment vehicles that require commitment over the long term; funds carry differing degrees of risk, e.g. an equity fund has the potential for higher returns in the long term but is more susceptible to market fluctuation. Therefore, short- term performance dips are more likely than those invested in a lower-risk fund such as a balanced fund. So, instead, assess your investments over a time horizon that is suitable for the specific unit trust and your financial goal.


Think logically, not emotionally

When it comes to investing, one of your best assets is to keep a level head and avoid impulsive decisions such as panic caused by short-term underperformance of your investment. It’s important to note that investment fluctuation is not a risk in itself; it exists on paper. The real loss of your investment only becomes a reality if you made a drastic decision such as withdrawing your investment because you were emotionally overwhelmed at the prospect of It losing its value.

As mentioned earlier, if you require any assistance in making financial decisions, speak to an independent financial adviser (IFA). It’s their job to guide you along your journey of financial wellbeing.