Page 35 - Waterfall City July Issue 2023

Rule 6: Compound interest
is your greatest ally
Over the short-term it may not seem Graph 4: How compounding works over time
like the difference between 7, 8, 11 or
15 percent is all that much, but these
differences grow and compound
over time. By way of example, a
R100 cash investment that grows
at 7% would grow to R387 over a
20-year period, whereas an equity
investment growing at 15% would be
worth R1 697.

Rule 7: Risks reduce over
time Source: PSG Wealth research team
Although equities can be volatile
over the short-term, they move closer Graph 5: How risks reduce over time
and closer to their long-term returns
as time passes. Thus, the returns can
vary greatly over a short-term period,
but the range of possible outcomes
reduces as time passes. Use time as
your protection against uncertain
outcomes.

Rule 8: The plan is the map,
and the map is sacred
Planning and preparation are integral
parts of wealth creation. When
markets turn volatile (as they often Source: PSG Wealth research team
do), it’s important to recognise that
these events have already been
factored into the plans a financial
adviser has prepared for you. We
view these events as a natural part
of the journey, a proverbial bump in
the road. As long as you stick to the
map, you won’t get lost. Have you
ever tried to outsmart Google Maps?
It rarely ends well!

Rule 9: Take advice
Investors who heed the advice of
professional financial planners have
a better chance of reaching their
investment goals. Research from US
financial services firm Morningstar,
titled Alpha, Beta and now Gamma,
argues that investors can generate
better returns by having a sound
investment plan and sticking to it.
The research concludes that the
retirement income for a hypothetical
investor would be nearly 23% higher
if they made use of a financial
adviser.

Waterfall City Issue 7 2023 33