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5 Questions to ask about your investments’ performance

By Isabelle Coetzee

It takes diligence and patience to build an investment. Any financial adviser would encourage you to leave your growing lumpsum, in spite of small fluctuations in the market.

However, at what point should you consider moving your investment elsewhere? JustMoney found out the signs that might indicate your investments are underperforming.

Tip: Plan for your future by starting a retirement fund today. Click here for more.

Ask yourself these questions

According to Sheila-Ann Robey, financial adviser at Lifeguards, an affiliate of Liberty, investment performance and the assessment thereof depends on your personal investment goals.

“Factors such as investment horizon, asset class, and the individual’s appetite for risk affect the decision-making process,” says Robey.

She suggests considering the following guideline questions when assessing investment performance, particularly underperformance:

  1. Is the investment performing below inflation?
  2. Is the investment performing in line with its peers?
  3. Is the underperformance of the investment a result of a short-term change in the market?
  4. Will the short-term change in the market readjust, and improve the performance of the investment in the long run?
  5. Is the perceived underperformance of the investment acceptable bearing in mind the initial financial goal or investment horizon?

If you’ve answered these questions and you feel that your investment may not be performing as well as it could be, it may be time to consider other options.

Should you move your investment elsewhere?

Robey believes it’s not always in your best interest to withdraw your money when a particular investment is underperforming.

“An analogy I often use when clients are inclined to cash out their investments when faced with short-term loss, is purchasing an item for R100 and then selling it for R50. Whereas, if they waited until the price of the item improved, the same could be sold for R120; the same goes for investments,” says Robey.

She explains that if the investment goal is long term, it may be best to ride out the short-term underperformance and wait for the investment to improve to reach that longer-term goal.

“Another option would be to simply re-evaluate the portfolios invested in and adjust same to be in line with your expectations. When deciding whether to cash out an investment or not, it’s always advisable to discuss it with your financial adviser to ensure that you’re acting in your best interest,” says Robey.

READ MORE: How to identify an investment scam

Make sure you get a professional opinion

Robey insists it’s important to review your investments with your financial adviser on a regular basis to ensure the performance is still in line with your financial goals, whether it’s focussed for example on retirement or planning for your children’s education.

“Have open discussions with your advisor regarding your needs, your investment horizon, and your expectations in respect of same,” says Robey.

“It is vital to remember why you took out an investment in the first place and not be deterred by short-term losses which might tempt you to cash out an investment and move you further from your financial goals,” she explains.  

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