Lacking investor loyalty could cause problems

Twenty three percent of people do not see the benefit of being loyal to a specific investment house, and therefore they do not see the benefit of a long term savings strategy. This is according to the Old Mutual Wealth results from a study that it conduct regarding people’s savings and investments.

Old Mutual Wealth’s CEO, Andrew Bradley, believes that this lack of loyalty to a particular investment house is because people are under the impression that they could get a better deal from a different investment house..

As a result of this, Bradley points out that people jump between investment houses, which can be a problem in some instances.

“Where it is a problem if they adopt that approach, it they chasing the best performer all the time, all our research indicates they are not going to do well because the investment markets work in different cycles. Different companies perform differently at different times.”

Bradley states that history indicates that it is better to keep your investment in one place for an extended period, rather than constantly move between investments.

He explains that when you move to another investment, you will come in at top. Therefore, getting the best on the market at the moment. But, by the time you leave, you are at the bottom of that investment, and haven’t earned anything on your money.  Therefore you don’t see a return on your initial investment.

Having a sound investment strategy

“The important thing is making sure you are in the right investment strategy. The key thing is knowing which is the right fund to go into to meet your needs, and as long as that continues to meet your needs, then you should stick with it. It doesn’t mean that you shouldn’t change, as long as the fund you’re in or the option that you are in continues to meet your needs,” explains Bradley.

From an investment point of view, Bradley notes that it is a good idea to have investments with different investment houses to spread the risk and to diversify your portfolio.

For customers not wanting to be loyal to a specific investment house, this is a way to ensure that they cover all their bases and don’t rely on a single investment.

“Spreading it can be a good thing if it is within a sound framework.”

Bradley believes that there are two key factors that cause problems for people when investing. “We need to improve our knowledge firstly, and then secondly make sure that we manage our behaviour to achieve our objectives.”

Tips for investors:

Bradley provides two tips to guide people when making investments.

1.       Make a budget:It is important to know exactly how much money you have coming in, and how much is going out in the way of expenses, and how much you can afford to invest.

2.       Be clear about the invest time period:Bradley stresses the importance of knowing what you are investing for, as this will influence the investment period. “If you are saving for a holiday at the end of the year or for retirement in 20 years, those are two fundamentally different objectives, and how you go about saving for them will be very different. Make sure that your investment structure and the investment portfolio you use is geared towards [what you are trying to achieve].”