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Cape Town - We all lead busy, hectic lives and it's so easy to leave investment planning in limbo on the 'didn't get around to it' list. But this decision can cost you dear, warns Lara Warburton, managing director of Imara Asset Management South Africa.
“Procrastination is very human, but the lazy man’s very leisurely approach to the implementation of investment strategy destroys untold billions in possible gains,” says Warburton.
She tells of a client who dithered for 10 months before finally confirming that a previously agreed strategy could be set in motion. The result? The client missed out on a 22% potential equity market gain.
“If the delay had been caused by a family crisis or an emergency drain on cash resources it would be understandable,” says Warburton. “But the client just never got round to it.”
In this case the losses were particularly glaring because the investor’s portfolio was extremely conservative and had been losing money to tax and inflation for many years.
“The opportunity to turn losses into sustainable gains without undue risk was clear. In this case, the potential upside ran to several thousand rands every month versus long, slow net losses in real terms.”
This kind of inertia is not uncommon in the consumer market for investment products, says Warburton. What makes it worse is that your losses won't show up immediately, because the effects of inflation and tax on a safely invested principal are not immediately apparent. This only encourages a tardy response, says Warburton.
“Urgent corrective action can be the difference between a comfortable retirement and struggling to make ends meet,” she says. But don't even think of timing the market - quickie tactical interventions to achieve this are not advisable.
Timely action is key: "Putting a good plan into place sooner rather than later is different," says Warburton, who warns that no one can accurately time market movements. The simple passage of time, "year after year for five or 10 years", is the secret to growing your wealth.
Don't let headlines about market movements and interest rates distract you from implementing a perfectly good plan to secure long-term growth and beat inflation.
"Too often investors procrastinate by putting off an investment decision until tomorrow or the next week, only to miss a market rally and thereby undermine their chances of earning a higher long-term compound return," says Warburton.
The message is clear: there's no time like the present for making the most of your investment opportunities.
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