The benefits of assessing investments regularly

It’s common practice to assess your personal finances annually. This involves taking stock of your financial products, such as medical aid and life insurance, and amending these agreements where necessary.

But how often should you check in with your investments? We found out from an industry expert when you should assess your investments and how to go about doing so.

Tip: Join CreditSav to track your investments.

Investments are not like other financial products

According to Bronson Friedman, divisional head and investment specialist of Capta Financial Services, how often you check in with your financial products depends on the complexity of your finances.

“Generally speaking, most insurance, medical aid, and hospital plans only change once a year so perhaps for those type of policies you can reassess them on the anniversary date each year to make sure the cover is still relevant and suitable for you and your family, and that the premium you are paying is competitive in relation to the rest of the market,” says Friedman.

However, he explains that when it comes to investment and savings accounts, you’d be inclined to investigate them on a more frequent basis as the majority of these accounts fluctuate daily and what you see today can be vastly different to what you see in a year’s time.

“It’s good to have an understanding of what your investment allocation is, how the portfolio is performing, and the fees that are being charged. This will ensure you don’t look back in five years’ time and realise the portfolio hasn’t done what it was mandated to do, because generally at that stage it’s too late,” says Friedman.

How to assess your investments

There are many factors to consider when assessing your investments. Friedman explains that the following five areas should be focused on specifically:

• Fees
• Risk
• Return
• Tax
• Liquidity

“If you’ve assessed your investments across these five spheres and you’ve got a good understanding of where each of them sits, then I’d say you are 90% of the way there.”

He adds that he’s included fees at number one because he believes this is where the bulk of the ambiguity lies. Often, clients aren’t familiar with the different layers of fees and costs being charged between the various parties involved in a transaction.

He recommends requesting an EAC (Effective Annual Cost) table from your advisor. It will give you a good indication of what you’re paying on an annual basis.

Educate yourself on investment matters

“I advise and encourage clients to get involved in their portfolios, ask the hard questions and really make an effort to try have a basic understanding of what you’re investing or putting your money in,” says Friedman.

“Ultimately it is the advisor’s responsibility to ensure the portfolio meets the requirements of the client, but we’ve seen some very questionable calls made by other “brokers” for additional commissions and incentives which would never make it past the client if they had a better understanding of the inner workings of their portfolio,” he cautions.