Are you investing with purpose or just playing it safe?

Ordinary people with the desire to create and preserve wealth, constantly ask themselves, “What are investments and what can they do for me on my journey to financial confidence?”.  Sherwin Govender, Business Development Manager at Glacier by Sanlam, offers some answers, by looking at the purpose and goals of investing.  

As an investor, what is your purpose?

“What is the purpose of investing?” You might answer: “I want to be wealthier than I am now”. However, that answer is meaningless, open-ended and won’t help you. What is your actual goal? Is it saving for your child’s education?  Is it to buy a property? Do you want to retire at the same level of comfort that you have now? Do you want to go on holiday overseas every two years? You need to probe deeper to uncover your very specific reasons for investing. This will help your adviser design a financial plan that includes a diversified investment portfolio that meets your needs and goals. 

What to know about goals

An effective goal is not the same as a wish or dream. Here’s what to know about goals:

1. They are deeply personal and specific, e.g. “I need my money to provide an education for my child at a good private school.”
2. They have timeframes, e.g. “I want to travel abroad on holiday, every two years.”
3. They are real and achievable, e.g. “When I retire, I want to have the kind of lifestyle where I can continue to afford to eat out at a new restaurant every week.”
4. They are not broad or vague, e.g. “I want to be rich.”
5. They are not unrealistic, e.g. “I want to be the richest person on the planet.”

The timeframe of when you will need to access your capital (which speaks to your need for liquidity) is also critical, so it’s important to know that goals have ‘soft’ and ‘hard’ deadlines.  For example, your goal to travel abroad every two years is a soft deadline, as going on holiday is not a critical, life-impacting need. If the economy is challenging and the exchange rate unfavourable, you can delay your overseas trip until the situation improves.

However, your goal to provide for your child’s education or to afford a hefty co-payment for hip surgery, would be life-impacting and, therefore, a hard deadline.     

What is your relationship with your money? That’s a key question.

The relationship that you have with your money is likely to be deeply emotional, and you probably don’t even know it. I’ll illustrate this with a story. 

Recently, a family member (let’s call her Penny) turned to me for some help.  She wanted to know if the R600 000 in her bank account that she kept for emergencies, should be invested in a better savings product, and what solution I would recommend.  After some probing, I established material facts about what this savings fund meant to her, and how her relationship with this money had a direct impact on how it could or should be invested:

• She is a single parent, and determined to give her child the best education that money can buy. Therefore, she is quite intentional about having money readily available for that, and whatever he may need to enhance his education (e.g. hockey kit, art classes, a maths tutor, if necessary).
• Penny loves to travel and dips into this fund every second or third year to go on holiday abroad. The value of her money has become a concern for her in light of the exchange rate. Recently, she had to cancel her trip to the US due to the rand/dollar exchange rate being too high.

Solutions should meet your financial situation, needs, lifestyle, life stage and investment goals

After establishing her goals – what motivates Penny to keep saving and having a desire to invest – it emerged that her R600 000 should be invested as follows:

The solutions selected align with Penny’s goals, and together combine to form a diversified portfolio that is efficient from a tax and risk management perspective, allows for currency fluctuations and allows her to access funds if she needs it.

Your path to financial freedom starts here

At Glacier, we believe in empowering clients to unlock their financial potential. Whether creating or preserving wealth, our trusted team is here to guide you every step of the way. Appointing an appropriately authorised financial adviser, is a big step forward in achieving and embracing a confident financial future. Visit Sanlam Money Meetups and find your perfect partner to accompany you on your journey to financial confidence.   

To learn more about Glacier, click here.

All capital sums and solutions quoted in this article are for illustrative purposes only.  Consult an appropriately authorised adviser for a holistic financial plan that includes a diversified investment portfolio.  DM

About Glacier by Sanlam

Glacier by Sanlam is your trusted partner in unlocking infinite investment opportunities. As the largest linked investment service provider, we have led the way in meeting the diverse needs of South Africans for over 27 years. Our extensive range of local and international solutions empowers investors to create, grow, and preserve their wealth. Through innovative products and expert advice, we offer infinite opportunities to achieve financial success. 

Glacier Financial Solutions (Pty) Ltd is a licensed financial services provider.

Sanlam Life Insurance Ltd is a licensed life insurer, financial services and registered credit provider (NCRCP43).