Tips to Reduce Investment Risk -- Weekend Argus Article -- 18 January 2008

To reduce investment risk in the year ahead, independent financial planner Debbie Netto-Jonker suggests that you:

1. Invest in quality
   All investments can go up and down in value, Netto-Jonker says. Quality investments can lose value at times, she says, but they tend to recover more quickly and stronger than other investments.
2. Use investments which protect you from inflation and tax
   Inflation and tax are the biggest enemies to your investment. Inflation diminishes the purchasing power of your capital. Tax can reduce your income and the capital gains you realize, especially if you are a high-income earner.
3. Invest for the long term
   Time in the market and not trying to time the market is important, Netto-Jonker says.
   Over the long term, you can expect that investment classes will perform inline with expectations. This means that over the long term shares should outperform listed property, listed property will outperform bonds and bonds will outperform cash.
4. Diversify
   Not all asset classes perform the same all of the time.
   So if you place all your money in the same asset class you can expect your returns to be volatile.
   One of the best ways to manage volatility is to diversify across investment classes, Netto-Jonker says.
5. Stick to a Strategy
   Netto-Jonker says you should choose an investment strategy that will deliver returns in line with your needs. Then you should monitor the performance of your investment on a regular basis, but unless there are very good resons not to do so, you should stick to the investment strategy you have chosen. Don’t buy and sell your investments in order to time the market, Netto-Jonker says.

The need to reduce investment risk varies from one individual to another depending on your circumstances and goals.

To develop a appropriate personalised, long-term financial strategy it helps engage the services of an independent fee-based certified financial planner.

Ask your money-savvy friends who they recommend or visit the Financial Planners Institute website www.fpi.co.za