With the current market uncertainty, we have been receiving many client enquiries about the impact of volatile markets on investment income. Willem Basson, National Executive: Business Development of Efficient Wealth, speaks to Diaan Janse van Rensburg, Managing Director of Naviga Solutions , about which approach investors can use to weather the market-volatility storm.
The silo approach unlocks the power of time to optimise an investor’s investment income. By using this approach, we spread an investor’s investment into silos to reduce risk. This leads to less anxiety about market fluctuations and to better investment outcomes.The silo approach allocates assets to short-, medium-, and long-term silos. The short-term silo is a conservative portfolio that aims to outperform cash.
Monthly income is only withdrawn from the short-term silo. It is, therefore, not necessary to sell assets at a loss during a year such as 2022. When the markets recover and deliver growth, profit can be taken and allocated to the short-term silo to ensure that there is sufficient capital for an investor’s short-term income needs. For more information about the silo approach, we encourage investors to watch our video about this investment strategy.
What advice do you have for investors that are worried about market fluctuations and a possible recession? Market volatility is normal and to be expected. Investors should not panic or sell their assets as this will lock in losses. In the case of the silo approach, there is sufficient capital within the short-term silo for an investor’s income needs to weather this current storm. Do not make hasty, uninformed decisions. Speak to your financial advisor and stay the course with your financial plan – this is a proven way to unlock the power of time.
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