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Setting financial goals for 2020

A new year has started, and 2020 is already well on its way. And we should all have started to focus on our goals and ambitions for this year.

In this column I wish to give you a few practical tips on how to take charge of your investments in 2020.

The year 2019 highlighted the pitfalls of relying on past performance. After 2018’s poor stock market performance and a seemingly never ending stream of negative news headlines, investors would be forgiven for thinking this year is no different. Despite perceptions, however, the JSE delivered a return of just over 11% for the year to date (1 January 2019 to 16 December 2019, source: Morningstar Direct, total return), comfortably outpacing inflation at 3,6%. If these figures take you by surprise they serve as a good reminder that past performance is not the best yardstick when it comes to planning your future investments.

Sentiment can often cloud our judgment, which leads to poor decision making. Your investments must be reviewed regularly to ensure they remain suitable for your long-term goals – but avoid the temptation to make unnecessary changes purely from the need to act. Putting a sound investment framework in place, and understanding how this supports you in achieving your long-term goals, can help prevent the urge to react to short-term market fluctuations. If you fell prey to emotions this year resolve to do better next year – either by educating yourself about investment principles or by partnering with a trusted financial adviser, who can help guide your investment decisions in future.

While the end of the calendar year offers a natural opportunity to pause and consider the future, it serves investors well to remember that we are also approaching the tax year-end at the end of February. This is something that can easily pass you by if you don’t work in the financial industry. Every year that you don’t use your tax incentives wisely, however, is a lost opportunity to save more efficiently. This may all sound very theoretical, until you remember that less tax can translate into more growth. Investing with a clear vision therefore also means planning with tax optimisation in mind.

It is often the technicalities that make or break an investment plan. Overlooking the finer nuances often results in sub-optimal plans or poor investment decisions. When deciding where to invest, it is therefore worth spending more time doing the research and laying the groundwork instead of simply opting for an easy answer.

Importantly, always consider your total financial needs, including how your need for long-term investment should be supplemented by flexible savings options and risk products. The best financial plan is one that is suited to your unique needs and goals – there is no one-size-fits-all answer for everyone. Invest the time with a professional financial planner who can help you develop a tailored plan suited to your needs and who takes all the important details into account.

* Dan Hugo is Chief Executive of PSG Distribution.

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