Take control
You need to be the catalyst for change. Unfortunately, waiting for Government legislation to come through isn’t practical because of their extended timeframes. And it definitely won’t come from the industry, because that would hurt their bottom-line. It must be you.
Change simply means taking on some of the responsibility yourself. Understand your own personal needs and look for the right product that suits those needs. For example, if you’re looking to save for your retirement, look for the best possible retirement annuity that will give you the biggest pot of money at the end.
First Principles
To understand your needs, you must go back to what are known as ‘first principles’. Get out a blank piece of paper and write down your goal – what you’re saving for. Once you have that, it will be easier to create a clear path to success. With a plan in place, all you need to do is stick to it. Easy!
Turns out it’s a little harder than you might think.
There will always be a lot of noise around the financial industry. The media, encouraged by the industry itself, seem to have a different outlook on the market almost daily. Doom and gloom stories drive consumers to jump ship at the slightest market dip, causing many to sell low and buy high.
All this does is eat into your pot at the end – but unfortunately that’s never the story you read. Always remember, long-term investing is about letting time do the work for you.
Know what you’re buying into
In order to stick to your plan, you need to understand the products you’re investing in. This isn’t as straight forward as you might think as the industry is notorious for complex jargon and endless choices. You must be sure of your needs: what are you trying to accomplish, and what you are trying to save for.
Once you have a clear picture of the type of product you need you can begin to understand how it works. Unfortunately, too many of us close our eyes and invest in products we don’t understand. This might be because we trust the person (broker) selling them to us, or the company has been around forever so they must be good. Right? Wrong.
If you want to ensure you’re making the right investment choice, you need to take all the emotion out of it. Demand transparent communication so that you fully understand what you are getting for your money – it is your money in the end.
This also applies to how much you are being charged. For instance, the long-term implications of fees can be devastating to your final pot of money. Paying just 1% more in fees can compound over 20 years to a loss of nearly 30% of your overall value.
Empower yourself
While you can demand clearer communication from the companies you wish to invest in, in the end you make the most difference. There is a wealth of good, independent advice out there. Don’t just rely only on what your broker has told you: go out and do a little research.
For example: Warren Buffett, at his latest AGM, passed on what he called “the best investment advice you will ever get.” A week later John Bogle, founder of Vanguard and the antithesis of Buffett’s general investment strategy, agreed with his old advisory. For that to happen it must be advice worth listening to.
There is a reason around 90% of South Africans are retiring without adequate funds – a stat that has barely changed in 20 years. We keep doing the same things, making the same mistakes and are left with too little money at the end of the day. The system won’t look after you – you need to look after yourself.
