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News Article : Investment Strategy
Category: Shares & Unit Trusts : Unit Trusts
Author:Nigel Benetton
Email:[email protected]
Posted:01 Mar 2004

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How to assess your position

Thinking about getting back into the markets or entering those seemingly turbulent waters for the first time? With over 400 unit trusts to choose from that's easier said than done. Glenrand MIB financial advisor Rudi Siggemann provides some sound pointers.

Basically, he says, there's a choice between investment portfolios that are actively managed by either yourself or an advisor – preferably both – or passively managed in a structured portfolio where the managers take the decisions for you, as part of a group of investors. Firstly however, he suggests you make use of the various risk profiling techniques available to determine which portfolio fits your current circumstances and future needs.

“Keep in mind that all investments have risks and costs,” he warns. “While a stockbroker makes money buying and selling shares, a unit trust company makes money by buying and selling units in a share portfolio. There are no free meals.

“Recently fees charged by unit trusts have increased, so be aware that your investment needs to grow in value at least to the extent of those fees, before you start making a profit.”

A big plus under the Financial Advisory and Intermediary Services (FAIS) Act 2002 is that you are entitled to full disclosure of all those fees. Bear in mind that, while risks vary, depending on the sector of investments, basic investment rules apply at all times. Accordingly, purchase an investment with full understanding of all its aspects - risk, cost and service. Also, limit your exposure to investments by spreading them among different investment houses and structure them to limit downside risk over any period of time.

“Carefully examine investments regularly to compare against current needs and circumstances - at least every two years if you are under the age of 45, yearly for ages 45 to 55 and half-yearly if you are within five years of planned retirement,” he further suggests. “A competent financial advisor should help here. Request regular updates on returns achieved by gross and net investment - last month, last three months, last year, year to date, etc.

“You should also choose portfolios that demonstrate good longer term returns. A unit trust with consistent good performance over time is preferable over one which performed well one year and poorly the next. The fund recommended by your hairdresser's aunt is not the one to buy. Good steady returns over time are recommended over flash in the pan performances,” he says.

For further information please call Rudi Siggemann, Financial Advisor Benefit Services on (011) 293 2740; or Email to: [email protected]

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