Why diversification matters and what your broker should consider!
We are living in a turbulent world. One only has to watch the VBS Saga unravel to know the true meaning of risk. This coupled with the current Eskom bail-out which could see a cut to South Africa’s credit rating and see government bonds ejected from the World Government Bond Index. And for those who thought foreign waters were less turbulent, some fund managers believe the economy will not be affected by Brexit and others warn of a bumpy future ahead. And then we have cryptocurrencies. In its brief past bitcoin has endured many steep ups and downs.
With very few financial advisers able to provide absolute clarity, and in absence of a crystal ball, diversification has become key to mitigating your risk and managing volatility.
A well-balanced portfolio should consider the following:
The key is to rebalance your portfolio at opportune times, slowly reducing risk as you approach your retirement.
Available tax incentives
The Section 12 J incentive is enticing with up to 45% immediate tax relief, with the opportunity to write off 100% of your investment against your taxable income in the year you invest. Whilst the Section 12 J companies seem to be performing, one still has to consider the prospects of the 100 plus companies and their ability to perform in the long-term.
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