Readers’ queries answered by financial experts, sponsored by PSG Wealth. Email your queries to [email protected]
Investment plan for 2022
I’m busy planning my financial investments for 2022. What are the most important market aspects to consider when planning the year ahead?
Name withheld
Pierre Puren, financial planner at PSG Wealth Jeffrey's Bay, replies: Start by identifying your individual goals. Furthermore, attempt to identify the time it would take to reach each goal. From there it gets easier. Imagine three empty buckets in front of you.
The first bucket is ‘Safety’ – all your short-term (less than two years) needs and planned capital expenses will be addressed from this bucket and invested in a cash or fixed income type fund. It provides certainty and is easily accessible with no or little volatility.
The second bucket is called ‘Preservation’ – here the goal is to preserve the purchasing power of your money against inflation. With your short-term needs addressed, you can take on some market risk in the form of volatility over the medium term (three – six years) as you have time to overcome any negative market fluctuations. Look to include an equal mix of growth assets such as equities and property, cash and bonds into this bucket.
The third bucket is labelled ‘Growth’ – here the goal is to amass capital over the long term (more than seven years) with the knowledge that all your other needs are taken care of. Look to allocate at least 90% to growth assets such as equities, property and business interests in this bucket as you have time to ride out any severe negative market effects on your portfolio.
A Certified Financial Planner can assist with the above and recommend appropriate investment opportunities in each of the buckets.
Finally, keep in mind that diversification is the only “free lunch” you’ll ever receive. Once your financial plan has been structured in such a manner to withstand the worst of storms, you’ll never have to concern yourself with any factors influencing the markets again.
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