BUSINESS NEWS - Matching the right asset class combination to your investment term will go a long way to yielding you preferable returns.

The view on the importance of asset allocation and portfolio diversification is based on the risk-adjusted return benefits of having a portfolio invested across different asset classes. 

In the first instance, a more diversified portfolio reduces the risk of your investment portfolio. In addition, the diversification improves the portfolio’s chances of consistent returns over time.

What is often not discussed enough, however, is the importance of a goal-based view in your choice of asset-allocation. For example saving for retirement will require a different asset mix than saving for a more short-term goal like a deposit for your new house. 

As such it’s critically important to consider your goals, before deciding the type of assets you want to be invested in.

Bheki Mkhize, CEO of FNB Wealth and Investment Solutions says, “Often investors are led to believe that the main recipe to successful investing is staying the course over the long-term. This is a fact that cannot be disputed; however it’s just as important to match your investment time frame with a suitable asset combination. In essence, it’s hard to achieve your investment goals if they are not aligned to the correct assets, no matter the amount of time the investment is held for.”

Matching your investment time horizon with the right assets is something that is often tricky for novice investors. While there are those lucky few who are well versed in the performance of assets under different time horizons, for most of us it’s rather daunting and overwhelming, knowing which assets to invest in for what period.

According to Mkhize, every investor’s aim at minimum is to see their investment out-pace inflation over a period of time, however, there’s no single asset mix that guarantees growth. 

Favourable returns on an investment are also dependent on broader macro-economic events. In addition to this, the more risk you are willing to take the better your potential returns.

FNB has introduced a range of 5 unit trusts collectively known as the Horizon Series, each with a mix of carefully selected assets with returns that are optimally linked to an investment time frame. The asset mix in these unit trusts have been selected by asset management experts across the First Rand Group and offer clients a blend of passive investments, single asset and multi manager funds.

“The primary objective behind the design of the funds is to match an investor’s time horizon to the right asset classes over a certain period of time taking the load off the investor having to choose the optimal assets themselves. The result of this approach is having a blend of asset classes that perform well above the market benchmark over a specific investment time frame,” says Mkhize.

The Horizon Series bouquet has been designed to make the accessibility to unit trusts less complex, making it easy to select the right fund while providing access to domestic and offshore investment markets.

“The investment philosophy of our unit trusts is anchored on achieving risk adjusted returns over a specified investment time frame. Since the launch 12 months ago, these unit trusts have attracted over R1bn of net inflows. 

"This is a positive outcome for FNB clients as they remain focused on their long-term needs, despite unfavourable economic conditions,” concludes Mkhize.

'We bring you the latest Garden Route, Hessequa, Karoo news'