Being Future-Fit – no protein shake required
Published Date: 11/09/2023
Source: By Fran Troskie, Manager Research Analyst PPS Investments
This is more-or-less the time of year when the word “summer body” gets flung around willy-nilly. It elicits several types of reactions, depending on personality and preference. We might jump on the dusty old treadmill, after gently relocating the family of spiders who have made it their winter home. We are determined. We huff and puff our way up inclines for at least an hour every day. For a week. And then we are “over it” or we might revert to good old Grandma’s broccoli diet. Or opt for the shake with zillions of (proprietary) ingredients that will shred those excess pounds… Realistically though, none of these short-term plans, outdated fads, or quick fixes are going to leave us particularly fit and healthy. Disgruntled, dissatisfied, and out-of-pocket certainly. Our future health, fitness, and overall well-being require a long-term, holistic, sustainable plan. We cannot focus on one aspect (the physique) while neglecting our general health, our minds, and our spirits. We need to balance each of these elements in a cohesive way, and we might need to draw on specialist knowledge and research to help us do so, without leaving our heads spinning.
Our future financial well-being is no different. So why would we invest for the short-term, at the risk of losing steam at the first sign of market headwinds? Why use the same investment strategy and/or investment manager that might have worked for Grandma in the 1950s? Why would we invest in the latest WSHKB-crypto currency just to see our nest eggs crack into a million pieces, realising along the way that We Should Have Known Better? Surely, we do not believe that we should be investing for a single season or a single period of our lives. Surely, we would like to ensure that our savings and investment decisions will carry us through the different cycles and hop off the treadmill of our lives.
We need strategies that are future-fit, strategies that help us to become financially resilient throughout our lives, and strategies that evolve to keep pace with our changing life circumstances. We’d also quite like to ensure that finding and implementing the appropriate strategy does not leave our heads spinning.
An integrated approach to investing
Let us try to make this integrated approach less daunting. Let us think of this journey as having three steps: We accumulate, we preserve, and we perpetuate.
- Accumulation Phase
The accumulation phase should ideally start as soon as possible: It is all about laying the foundation for our future financial well-being. We often mistakenly believe that we can only start accumulating wealth once we earn x-amount or reach y-age. This is as much of a myth as the wonder-diet. What if we set aside the extra cappuccino that we buy every day? It probably will not make us miserable, but it might just give us (say, at a conservative R25 per cup per day) an extra R750 to invest per month. That is a tiny, quick caffeine fix missed, and our hearts and future selves will thank us. R750 does not sound like much but let us contextualise: Some financial products only require a monthly instalment of R500. What is more, just as we might start with a leisurely 20-minute stroll, and eventually jog for 40 minutes, our contributions are likely to increase as we progress on our professional path. As in all phases of our investment journey, it is important to ensure that our portfolios are appropriate for the accumulation phase. In this stage, we might have a slightly higher risk appetite, and we might be willing to allocate to a more aggressive portfolio. It will typically have more exposure to riskier, potentially higher-return assets like equities. The accumulation of wealth, cementing the foundation for our future fitness, can often feel the most daunting. But the peace of mind, the sense of well-being, and the knowledge that we have a nest egg should be worth it. Not only for ourselves but for our dependents.
- Preservation Phase
In the preservation phase, we focus on maintaining what we have worked so hard to build. We stay active, we keep fit. We do not need to take our foot off the pedal in terms of adding to our investment portfolios, but our needs may have changed. We may be in a different life stage or we may be focused on a new horizon. We might even be seeing stars in the eyes of our dependents when they dream of their own future degrees, jobs, and families. At this stage, it is important to achieve the right balance between risk and return, between growth and preservation, and between spending, investing, and saving. It might mean that our portfolio contains a mix of equities, higher-yielding fixed-income instruments, and more defensive cash-like assets.
- Perpetuation Phase
Perpetuation – it is quite a lovely word for the third phase of our investment cycle. If we have been a little bit smart about how we have invested, we can sustain a comfortable lifestyle. We can enjoy the peace of mind that comes with having lived in a way that contributes to our (financial) health. And we can even start thinking about our legacy. Our portfolio may be focused on keeping this legacy intact, keeping our nest egg safe. While there will still be an element of accumulation and growth in the portfolio, it is likely to be more focused on downside protection, on investing in assets that will keep pace with inflation and the cost of living.
Balance and cohesion are common threads throughout our fitness journey (be it in our lives or in our finances). Constructing a portfolio that delivers sustainable investment returns offers access to diversified drivers of return remain risk-conscious harnesses the appropriate skillsets and blends the right asset managers and asset classes… well, now we are certainly left feeling as though our heads are ready to open their own spinning studio.
So, let us make this less daunting. Credible multi-managers and investment professionals with hard-won experience and expertise can and will take care in constructing portfolios which allows us to feel that our nest egg is safe. Multi-managers are the specialists who can craft our holistic, sustainable investment strategy: balancing risk and return considerations, building diversified portfolios, identifying best-in-class asset managers, blending appropriate asset classes, and creating portfolios that are suitable for our current life stage and our future needs.
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