Every one of us defines financial freedom in a different way. For some, it might mean being able to retire at 60, for others it might come in the form of a dream beachfront home or a round-the-world holiday. No matter what your financial goals are, you will need to ensure your investment strategy is well-aligned to achieve them. By better understanding the nature of your portfolio and how it is invested, you put yourself in a better position to meet your financial goals.
When it comes to asset management, there are four distinct classes within unit trusts, all of which come with their own associated risks and rewards. How your fund manager decides to invest will have an enormous impact on both your short- and long-term financial goals.
A unit trust is made up of a number of asset classes, one of which is equities. Equities, in simple terms, are the shares that a fund will purchase from the stock market for a specific listed company.
For example, when a fund invests in equities, they are in effect only purchasing the shares of companies listed on a stock exchange, the value of which fluctuates depending on the market’s perceptions of the company’s value and its potential to generate income. These shares are valued based on a number of factors, including what the market believes a shareholder might receive as an annual dividend. As a result, you will often find that the value of a share might fluctuate significantly on a daily basis, as investors speculate about the worth of a particular share.
The property asset class refers to owned shares in a listed company that is directly involved in the day-to-day purchase, development, sale and rental management of physical real estate.
In this case, we specifically look at investments in property management or investment companies that trade in real estate, such as Growthpoint or Redefine. These companies invest in properties in order to make a profit, either in the form of building development, the realisation of gains on sales or via rental income.
“Stringfellow Investment Specialists is invested in a number of African property equities”
Emerging African markets, where expansive growth is taking place, currently present some very exciting investment opportunities in this asset class. In order to capitalise on this expansion, Stringfellow Investment Specialists is invested in a number of African property equities, and through the expertise of our preferred managers, we ensure that we invest in shares that are likely to receive superior returns over the medium to long term.
A bond is an investment in which a unit trust loans its cash to an entity – often a government or large corporate – in return for a fixed interest rate to be paid back within a predetermined timeline. In the same way you can approach your bank for a loan, the borrower (government) is allowing you to give them your money, for which they will guarantee interest.
Bonds are generally considered a more stable form of investment, as it is highly unlikely that a government will default on the bond repayment. Bonds carry a guaranteed interest amount, and therefore come with a lower risk factor, but are also less likely to yield the types of returns generated by equity or property asset class investments.
An alternative form of bond investment can be made by trading a bond before it has reached the end of its term – much like equities trading. This type of investment allows for a stable return over the lifetime of the investment, and will constitute a higher percentage of a fund in which its investors are looking to have a fixed income over the lifetime of their investment.
Cash, also known as money, moola or ‘I-never-seem-to-have-enough-of-it’, is considered legal tender that is used in the exchange of goods and services. The simplest form of a cash investment (in terms of the asset class) comes when you deposit your money into your bank account. In so doing, you are in effect making an ‘investment’ in that bank’s cash supply. This cash is then used by the bank to generate profits through loans to other people, which they in turn use to pay you back (in the form of a withdrawal) your initial ‘investment’ with interest.
At Stringfellow Investment Specialists, we believe that cash is best used as a means of purchasing items for daily consumption, rather than as a vehicle for savvy investing. That’s because, in the case of investing with a bank, you are the product from which the bank makes its profit, as opposed to share investment, in which your shares make money for you.
As true long-term investment specialists, we believe that real assets like shares, property, and bonds will always outperform cash and inflation. At Stringfellow Investment Specialists we are uniquely qualified to meet your investment goals.