TO INVEST OR TO BUY?…….. TO DIVERSIFY OR TO SIMPLIFY?

Kharmen Mathios talks about Personal Financial Portfolios and what is the “right” mix?

Many of my clients over the years have expressed concerns about their financial portfolios and the construction thereof. I have often been asked whether to buy property OR to invest in cash OR to send monies offshore OR to invest in a business etc…. These are the many decisions facing each of us on a daily basis when it comes to financial decisions – when do we know it is right for us?

My experience in the financial industry which spans over 26 years has provided me with some valuable insight into how to maximise our financial portfolios from an income, risk, wealth creation and financial security position. In order to ensure that we minimise risk we need to diversify our portfolios and invest/spend our money in a way that creates maximum income and wealth. This is not a simplified and easy process as certain disciplines and strategies need to be implemented.

Some asset acquisitions may require leveraging (ie using debt – someone else’s money) in order to purchase/acquire the asset – ie. property purchases may require the banks money via a home loan. Implementing a diversification plan will require various strategies and allocation or acquisition of the appropriate monetary resources – the means will differ from individual to individual.

In order to assist you, I have compiled a short 1 page graphic presentation of what an Investment Diversification Model portfolio should look like. This is a mere illustration of an “ideal” portfolio and the parameters and model may need to be adapted to individuals depending on their specific goals and available resources.

Every individual’s circumstances are different and we are all going through different “life stages” which require different financial focus points. With this fact in mind it is essential that you have the right “financial coaching” in order to ensure that you are not only growing your portfolio constantly but that you are also steadfastly working towards your financial goals and dreams. Just as we sometimes need a “personal trainer” at the gym, a “mentor” in the workplace, a “coach” for our sports team we all need some “financial coaching” to assist us through the highly technical and specialised financial investing environment. If you don’t have a financial advisor fulfilling this role then it is time to find an advisor who can assist in making you financially savvy and independent.

Please feel free to contact me should you wish to discuss this model further OR should you wish to embark on some personal “Financial Coaching” in order to achieve your specific financial goals - Contact Me

Diversification of your portfolio is not a very simple concept or process and is always dependent on your available funds or the financial leveraging you can do – the hard part is deciding where you want to place your funds. To effectively diversify one’s portfolio you will essentially have 8 baskets to choose from and preferably be working towards having a bit of each one of these baskets over your lifetime. Each of these baskets will have a different priority during your different “life stages”.
Your 8 main baskets are :
1. Cash
2. Property
3. Retirement funds
4. Risk, Estate Planning and Tax
5. Local Funds
6. Offshore Funds
7. Trusts and other asset owning vehicles, own business/es
8. Passive Income

Each individual will have a different financial plan and different financial goals which will result in a unique plan with different priorities in each of these plans. In order to create the most effective plan for yourself, you need to identify your risk appetite and where your funding priority lies – this will effectively determine what your individual portfolio looks like. There is no right or wrong portfolio however there are some guidelines when reviewing or constructing a new portfolio :
? Always ensure that you have a liquid emergency fund
? Never invest all your funds into just one asset
? Always ensure that your assets have a spread in terms of liquidity, asset classes, stocks/shares, funds, fund managers and companies
? Always ensure that there is a spread between short/medium/long term investment types as well as risk ratings
? Always ensure that your investments and the vehicles you use minimise your tax and estate duty obligations
? Always ensure that you have adequate risk cover – especially if you are the bread winner in the household
? Passive income, retirement funding and other income generating vehicles are very important when considering your retirement date and options
? It is advisable to consult a financial advisor if you are unsure of any of the above OR if you need assistance with your portfolio - contact me if you require assistance : [email protected]

Yours in Finance
Kharmen

www.magicenter.co.za