Dear Valued Clients,
In the world of investing, success is not solely determined by market trends or economic forecasts. Rather, it often hinges on our ability to navigate the complexities of human behavior and emotion. That's where behavioural coaching comes into play – a powerful tool that can significantly enhance your investment outcomes. Behavioural coaching recognises that our decisions as investors are influenced by a multitude of psychological factors, from fear and greed to overconfidence and herding behavior. By understanding and addressing these behavioral biases, we can make more informed and rational investment choices, ultimately leading to better long-term results. Here's how behavioral coaching can benefit you: 1. Emotion Management: Investing can evoke strong emotions, particularly during periods of market volatility. Behavioural coaching helps you recognize and manage these emotions, preventing knee-jerk reactions that could derail your investment strategy. By maintaining a calm and rational mindset, you can avoid impulsive decisions that may harm your portfolio's performance. 2. Goal Alignment: Behavioural coaching focuses on aligning your investment decisions with your long-term financial goals. By clarifying your objectives and risk tolerance, we can tailor an investment strategy that reflects your unique needs and aspirations. This ensures that your portfolio remains aligned with your overarching financial plan, providing a clear path towards achieving your objectives. 3. Overcoming Biases: We all harbor cognitive biases that can distort our perception and decision-making process. From anchoring bias to recency bias, these cognitive pitfalls can lead to suboptimal investment outcomes. Behavioural coaching helps you recognize and overcome these biases, allowing you to make more rational and objective investment decisions. 4. Long-Term Perspective: One of the key principles of behavioural coaching is promoting a long-term investment perspective. By focusing on the bigger picture and tuning out short-term noise, you can avoid making reactionary decisions based on temporary market fluctuations. This disciplined approach fosters patience and resilience, essential qualities for successful long-term investing. 5. Accountability and Discipline: Behavioural coaching instills accountability and discipline in your investment approach. By adhering to a well-defined investment plan and regularly reviewing your progress, you stay on track towards your financial goals. This disciplined approach helps you resist the temptation to deviate from your strategy, ensuring consistency and continuity in your investment journey. In conclusion, behavioural coaching serves as a guiding light in the often turbulent waters of investing. By harnessing the power of psychology and emotion, we can navigate market uncertainties with confidence and clarity. As your trusted advisor, we are committed to providing personalized behavioral coaching to support you on your investment journey. Remember, successful investing is not just about numbers – it's about understanding human behaviour and making smart decisions accordingly. Together, let's harness the power of behavioural coaching to achieve your financial goals and secure a brighter future. Best regards, Kevin Yeh, CFP Director
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The festive season is a time to switch off from work, recharge the batteries and spend quality time with friends and loved ones. It is also a time when many people throw caution to the wind, and sometimes, their budgets as well.
You can avoid a financial hangover in the new year by considering the following tips: Create a spending plan. Draw up a financial plan that accounts for your wants and needs between the end of November to January. As many people get paid early in December, the goal should be to stretch the November salary as far as possible into December, so as not to dip into their year-end paycheck too soon. Prioritise debt and savings. If you are fortunate enough to receive a bonus, maximise the windfall by allocating a portion to your savings and investment accounts. Provisions should also be made for paying off outstanding debt. Hide the credit card. If you are ill-disciplined, remove your credit cards from your wallets to avoid unnecessary and costly spending. Beware of festive season scams. Phishing attacks are prevalent at this time of the year. Be sure to examine emails and SMS messages very carefully, and be cautious of clicking on links. Always hover over links before clicking on them and take note of the URLS they direct you to. As technology advances and digital transactions become the norm, protecting your personal information has never been more critical. As your trusted financial adviser, it's my duty to ensure that your data remains secure at all times. Here are some essential tips to help you safeguard your personal information:
1. Limit Information Sharing: Be cautious about sharing personal information, especially online. Only provide necessary details on secure and reputable websites. Avoid sharing sensitive information, such as your identity number or banking details, unless absolutely necessary. 2. Use Strong Passwords: Create strong, unique passwords for each online account. Use a combination of letters, numbers, and special characters, and avoid using easily guessable information like birthdays or pet names. Consider using a password manager to securely store and manage your passwords. 3. Enable Two-Factor Authentication: Enable two-factor authentication (2FA) wherever possible, especially for sensitive accounts like online banking and email. 2FA adds an extra layer of security by requiring a second form of verification, such as a code sent to your phone, in addition to your password. 4. Regularly Monitor Your Accounts: Keep a close eye on your financial accounts and credit reports for any suspicious activity. Report any unauthorised transactions or unfamiliar accounts to your financial institution immediately. 5. Be Wary of Phishing Attempts: Be cautious of unsolicited emails, text messages, or phone calls asking for personal or financial information. These could be phishing attempts by cybercriminals trying to steal your information. Always verify the legitimacy of the sender before responding or clicking on any links. 6. Secure Your Devices: Ensure that your devices, including smartphones, tablets, and computers, are protected with up-to-date antivirus and security software. Keep your operating system and applications updated with the latest security patches. 7. Secure Your Wi-Fi Network: Secure your home Wi-Fi network with a strong password and encryption. Avoid using public Wi-Fi networks for sensitive transactions, as they can be vulnerable to hacking. 8. Dispose of Personal Information Securely: Shred or securely delete any documents or electronic devices that contain personal or sensitive information before disposing of them. This helps prevent identity theft and unauthorised access to your information. 9. Educate Yourself: Stay informed about the latest cybersecurity threats and best practices for protecting your personal information online. Educate yourself and your family members about the importance of cybersecurity and how to stay safe online. 10. Review Privacy Settings: Regularly review the privacy settings on your social media accounts and other online profiles. Limit the amount of personal information you share publicly and adjust privacy settings to control who can see your information. By following these simple yet crucial steps, you can significantly reduce the risk of identity theft, fraud, and other cybercrimes. Remember, safeguarding your personal information is not just about protecting your finances—it's about protecting your peace of mind and ensuring a secure future for you and your loved ones. If you have any concerns or questions about protecting your personal information, don't hesitate to reach out to me. Your security and privacy are my top priorities. Death, while an incredibly difficult subject to confront, is one of life's unavoidable realities. Yet many investors fail to prepare for this eventuality and put their loved ones' financial futures at risk. According to The Fiduciary Institute of Southern Africa, more than 75% of South Africans pass away without a valid will drawn up.
In the spirit of National Wills Week this month, we want to empower you to prepare adequately and help you leave a lasting legacy by posing these questions: • Is your will up to date? Make sure you keep me abreast of any material and life-changing events, such as marriage, the birth of a child, or a death in the family. • Are your retirement fund nominees' details up to date? • Are the beneficiaries of your various policies up to date? If your investments are structured as a life policy, you will need to make sure your service provider has the correct beneficiary appointments on file to ensure speedy payment to your intended beneficiaries. • Have you planned for immediate needs? Make sure you have made provisions for any immediate expenses, such as funeral costs, that may need to be covered before your investments can be accessed. • Have you spoken to your beneficiaries, dependents, and nominees about the contents of your will? Contact us on [email protected] if you want a financial planner to review your financial affairs. Research indicates that women tend to dedicate more time to researching their investment options and are twice as likely as men to rely on financial advisers for guidance in their financial planning decisions. Numerous studies also suggest that women approach investing with a longer-term perspective and are more inclined to hold investments for extended periods rather than attempting to time the market. These characteristics can be leveraged to achieve financial independence and close the investment gap.
As we commemorate Women's Month, here are four tips to empower women to take control of their financial well-being: 1. Establish a budget and define financial goals. Avoid vague objectives and strive for specificity. For example, rather than setting a general goal like "save money for the future," define specific objectives such as "save R10,000 per month for retirement by contributing R5,000 to a retirement fund and R5,000 to a long-term investment portfolio." This level of specificity provides clarity and direction, making it easier for you to track your progress and stay committed to your financial goals. 2. Develop a comprehensive plan. This should encompass both a savings strategy (including an emergency fund) and an investment plan. 3. Automate the process. Set up debit orders for your investments and consider scheduling annual escalations in advance. This will help you invest more every year on autopilot. 4. Allow decisions time and space. Recognise your biases and external influences, and be thoughtful in your decision-making. Here are three common examples of biases: 1. Confirmation Bias: This is the tendency to search for, interpret, favour, and recall information in a way that confirms one's preexisting beliefs or hypotheses. For example, you might be more likely to remember and focus on information that supports your investment decisions while ignoring or downplaying contradictory information. 2. Overconfidence Bias: This bias involves overestimating one's own abilities, knowledge, or judgments. It can lead to taking excessive risks in investments or being overly confident in the success of certain strategies without considering potential downsides. 3. Loss Aversion Bias: Loss aversion refers to the tendency to strongly prefer avoiding losses over acquiring gains of the same or similar value. It can lead to overly conservative investment decisions, such as holding onto losing investments for too long in the hope that they will recover, rather than cutting losses and reallocating funds to more promising opportunities. ![]() Q: What are some of the key considerations from an investment perspective for factoring the two-pot system into a retirement portfolio? Firstly, let’s look at the background and context of these changes. The objective of the retirement fund industry is to ensure members can retire comfortably with adequate provision to retire in comfort. However, a small percentage of retirees can afford to maintain their pre-retirement standard of living due to a number of reasons, including inadequate savings and not preserving their retirement savings when changing employers. The South African retirement landscape has evolved over the years with several regulatory changes coming into effect to bring about retirement reform. The most recent of these changes comes in the form of the two-pot system, following the signing of the Revenue Laws Amendment Bill into law on 1 June 2024. This move confirmed that the Pension Funds Amendment Bill will also soon be signed, cementing the two-pot system's rollout set for 1 September 2024. With the implementation of the two-pot retirement system rapidly approaching, it’s important that the changes, which affect all retirement fund members (in a pension fund, provident fund, retirement annuity, or a preservation fund) as well as the implications thereof is clearly understood. It’s important to note that provident fund members who were 55 years old on 1 March 2021 can adopt the new two-pot system or maintain the previous system. Let’s unpack the two-pot retirement system from an investment perspective, highlighting key considerations for retirement fund members. What is the two-pot system? The two-pot retirement system in South Africa is a reform to the retirement savings framework. This system aims to balance the need for long-term retirement savings with the need for individuals to access their savings in times of financial hardship. Essentially, the two-pot system is a strategy for managing retirement savings which involves dividing an individual’s retirement funds into three separate pots, even though it is called the two-pot system. The first component (called the savings pot) is set aside to be accessible during periods of financial difficulty. Retirement fund members are allowed one withdrawal (minimum of R2000) from the savings pot during a tax year. The second component (called the retirement pot) has to remain invested for the purpose of targeting long-term growth for retirement provision. The third component (called the vested pot) in the retirement savings system in South Africa is designed to ringfence members’ accumulated retirement savings before the implementation of the two-pot system. This means that all accumulated retirement savings invested as at 31 August 2024 will form part of a ringfenced component of ‘vested’ funds. Access to the vested pot is governed by the retirement fund rules that were in place before the two-pot system was introduced. The vested pot ensures that the transition to the new system does not disadvantage individuals who already have significant retirement savings. What will happen when the two-pot system is implemented? The savings pot will be seeded from the retirement fund members’ accumulated retirement savings via a once-off compulsory transfer of 10% but will be capped at R30 000. It’s important to note that this will be a once-off transfer when the two-pot system is implemented and will not be repeated in the following years. However, under the two-pot system, all future contributions will be allocated as one-third to the savings pot and two-thirds to the retirement pot. For example, a monthly retirement contribution of R1 200, will be split into: R800 allocated to the retirement pot and R400 to the savings pot. Two-thirds of all future retirement contributions invested in the retirement pot can only be accessed at retirement date, while one-third of future retirement contributions that are invested in the savings pot can be accessed to cover unexpected financial needs before retirement. The withdrawal from the savings pot will be subject to a prescribed minimum of R2 000 and will be allowed once every tax year (1 March to 28/29 February). Keep in mind that marginal tax will be levied on every withdrawal. As always, we strongly encourage that you consult with your financial adviser to make informed financial decisions with full understanding of the implications thereof. The intention driving the two-pot system is to provide retirement fund members with access to the savings pot (before retirement) in times of financial difficulty. The idea is to circumvent a trend where retirement fund members resign from their employer to get early access to retirement funds and forgo the opportunity to preserve their retirement savings. By splitting retirement funds through the two-pot system, it provides access to retirement funds for financial relief in the short-term and enables individuals to make more informed decisions about their long-term retirement funds. In short, the long-term outcome will be greatly improved under the two-pot system because it will require members to preserve at least two-thirds of their retirement benefits when changing jobs. Considerations of the two-pot system Because there are three different ‘pots’ to keep track of, it’s important to take a holistic view of your retirement portfolio and carefully assess the long-term impact of accessing retirement funds before reaching retirement. There are implications of early access to retirement funding, such as tax implications for early withdrawals, missing out on the benefit of compounding and the risk of not reaching retirement goals. As always, it’s critical to make informed decisions in close consultation with your financial adviser around your retirement planning and fund management. Investment strategy An investment strategy for a retirement fund should be aligned to the primary goal of retirement income provision, regardless of the two-pot system being implemented. The investment strategy of your holistic retirement portfolio should be focused on long-term growth, aiming to generate returns that outpace inflation. Due to the limited size of the savings pot in the context of your broader savings plan, liquidity concerns should theoretically not be a primary concern when making investment choices. One approach you might consider is maintaining the current long-term investment strategy across both the savings and retirement pots. However, a potential drawback is that if you’re looking to withdraw funds, you could realise losses if you’re invested in an aggressive strategy suited for the long-term that may be in a period of underperformance. Alternatively, you could opt for a strategy where the savings pot offers a lower-risk profile compared to the retirement pot. This choice could lead to lower overall returns over time. One could balance this by pursuing a more aggressive investment strategy for the retirement pot to compensate for the lower returns expected from the savings pot. Another tactic could involve adopting asymmetric strategies that promote capital growth while managing volatility. What is important to focus on when investing for retirement is to ensure an adequate asset allocation and careful portfolio construction that ensures risk-adjusted returns suitable to meet your retirement goals in the timeframe available. It’s important to carefully balance your investment objectives, and assess liquidity risks. Equally crucial is your preservation preferences, contribution rates and risk appetite, as these factors will influence your decision. One of the common pitfalls is to derisk at retirement by reducing growth asset exposure, such as equity or property, which can further erode your retirement investment. These investments come with a higher level of risk, but they offer the potential for long-term growth. Of course, asset exposure in retirement portfolios should comply with limitations set out in Regulation 28 of the Pension Funds Act. Another key step is to regularly review and rebalance your investments to maintain an optimal asset allocation aligned to your circumstances, risk appetite, retirement goals and time horizon. Balancing risk, return expectations, and one’s retirement needs will be pivotal in shaping effective investment strategies under the two-pot system. Investing for long-term growth Well-diversified multi-asset funds are a popular choice for longer-term investors, such as retirement portfolios, who are looking to grow their retirement capital faster than inflation with steady returns. Our flagship M&G Balanced Fund has proven to be an excellent example of a balanced fund having produced excellent risk-adjusted returns over time. The Fund has outperformed its benchmark, the ASISA SA Multi-Asset High Equity Category Average over the medium to long term, having returned 9.8% p.a. (A class, net of fees) versus the benchmark’s 8.5% over three years and outperformed its benchmark by 1.5% p.a. since its inception in 1999 (up to 31 May 2024). The Fund’s success is due to its strategic asset allocation, tactical asset allocation and stock selection, as well as the proven investment philosophy and process consistently applied during the Fund’s successful 25-year history. Proceed carefully with too many pots on the stove While the two-pot retirement system offers a flexible approach to managing retirement savings in South Africa, it is intended to encourage preservation of retirement funds at resignation. Early access to ringfenced funds can offer much-needed financial relief in the short-term, but we strongly recommend that these funds are accessed only when absolutely necessary. Lest we become too focused on the short-term and forget about the reason for retirement fund savings: to secure a comfortable retirement during the years when you no longer earn a regular income. Written by: Hamilton van Breda - Head of Retail Sales at M & G Investments ![]() Professional indemnity insurance is a type of insurance coverage that protects professional and their business from legal costs and claims for negligence, errors, or omissions in their professional services. PI covers the costs associated with defending claims made against professionals by clients or third parties, alleging financial loss due to professional negligence, errors or omissions. This cover is very essential for professionals who provide advice, consultancy or services where clients rely on their expertise. This includes professionals like doctors, lawyers, architects, engineers, accountants, consultants and IT professionals. Claims covered under this cover may include breach of duty of care, negligence, unintentional infringement of intellectual property rights , loss of data or documents and more. Moreover PII not only covers compensation payments but also legal defences costs , which can be substantial even if a claim is ultimately unsuccessful. Policies can be tailored to specific risks of different professions. For example, the coverage needs to a software developer may differ from those of a financial advisor. This kind of cover is usually written on a claims made basis , meaning the policy covers claims made during the policy period, regardless of when the alleged incident actually occurred. It is without doubt that having PII provides peace of mind and financial protection against the unpredictable risks that can arise from providing professional services. Consult with us today so that we help you determine the right coverage for your specific needs and risks. If you would like us to assist your business to get a Professional Indemnity quote contact Ruva in our Short term department, email: [email protected], tel: (011)658-1333. Written By: Ruva Mavaire ( Daberistic - Underwriting and Claims Consultant) |
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