Are your investments working hard enough?

You know that little chat you have with a personal trainer when you join the gym? Today we are going to do the equivalent of popping you on the scale, taking a few body measurements and seeing how many push-ups you can do in a minute. But, instead of making you out of breath, we’re going to see how your current investments are performing. Ready?

Let’s start with what you have

Whether you’ve only been saving for a few years or have been putting money away for decades, it can be easy to lose track of your investments. It’s not uncommon for people to have several bank accounts, RAs, pensions, unit trusts, stock investments, and, and, and… not to mention several insurance policies. It can be overwhelming, we know. Hands up if this sounds familiar:

• You were sold a product but have forgotten what its benefits are?
• You’re no longer in touch with the broker who sold you the product?
• You get one piece of mail a year with a breakdown – but you’re not sure how to interpret it?
• You have investments that are quite mature but you’re not even sure if they are still growing?

So first things first, dust off those investments or ask a financial advisor to look into it on your behalf.

Your money must work hard for you

When you meet with the right independent financial advisor, it’s important that he/she takes a close look at the way your money is currently performing. In South Africa’s volatile economy, we sadly never know what’s going to happen. Inflation and interest rates might shoot through the roof, markets might crash again. To guarantee consistent growth, you need to know your nett rate of return.

What’s the nett rate of return of your investments?

Don’t worry, most people don’t know the answer to this one. Or maybe you’re relatively on top of things and can answer “Sure, my XYZ gives 12% annual return”. BUT remember that the disclosed rate of return is the gross rate of return – in other words before fees, expenses and taxes have been taken off.

These fees can really make or break the success of your investment. Fees charged depend on how much you invest and how long for, which funds etc. Fees typically include your advisor’s fee, the platform fee, an asset management fee, etc.
So while the gross rate of return is a nice-looking number, this is not the rate of growth that you are actually getting. At Ginsberg Financial Services, we are adept at working out the nett rate of return of each of your investments. Together we can then decide what to do – e.g. move your money into a better performing fund or stay put.

What to learn from knowing your nett rate of return:

• It’s not a number your investment or insurance company wants you to know. Because there are various ways in which companies deal with the implementation and transparency of fees, you could find yourself with a very mediocre nett rate of return. Or you may even find yourself with negative growth, which is even worse. In other words, those fees will start eating into your investment!
• It’s not a number you can get to on your own – it’s a complicated back calculation based on annual increases, whether contractual changes happened and if any loans or advances were made. We can help you work it out.
• Finally, it’s never too late to improve your financial fitness. As the saying goes, the best time to plant a tree was twenty years ago but the second best time is today.

There is no time like the present so if you want to put your investments to the test, book a free wealth coaching session with us today. Just call 021 434 8065 or drop us a line at ivan@gfb.co.za and we’ll book an appointment.