Author: Momentum Investments
The effect of COVID-19 on global markets and economies has been far reaching and severe. At the end of March 2020, it was a scary place for investors. The magnitude and the speed of change in the markets were unprecedented because of the fear and uncertainty over the COVID-19 pandemic.
The S&P 500 was bouncing along relatively flat, but the crash in February and March was severe and far worse than the 2008 financial crisis. The market fell more than 36% in roughly 30 days. The SA equity market was also bumping along, and like elsewhere, the local market was down nearly 30% in absolutely no time at all. 1
Dealing with uncertainty and volatility is never easy especially when top of mind for everyone at the moment is – are we experiencing a second wave? Given this volatility and uncertainty, it is understandable that investors are concerned about the state of the market and what they can do to protect themselves.
This is the world we are living in and investors need to structure and manage their investment portfolios accordingly. Guaranteed investment solutions come in various forms and can offer investors ‘peace of mind’, irrespective of how the market performs.
With certainty, planning for the future becomes a lot easier.
Guaranteed solutions essentially offer 3 types of protection benefits
|Minimum return guarantee||Guaranteed growth||Guaranteed income|
|This benefit gives you a minimum return at the end of a term and the potential for additional returns if the markets perform well. These investments tend to offer a lower return guarantee because of the upside potential. If markets perform poorly then your capital is protected along with your minimum return.||This benefit gives you a guaranteed growth rate so that at the end of your term you know exactly what your maturity value will be. With this type of investment, you sacrifice any upside if the markets perform well. There is no market risk and your capital, and your investment growth is always protected.||This benefit gives you a regular income. You have options that can guarantee an income that increases or remains the same. You can also choose if your income must be paid for the rest of your life or for a specific term. Market fluctuations will not affect your income. Your income is guaranteed based on the selections you made.|
You can get these protection benefits individually or as a combination of a growth and income guarantee.
When should you consider a guaranteed investment solution?
Well, right now, everybody should be investigating a guaranteed investment solution with their financial adviser. How much of your investment portfolio should be diversified depends on the person’s life cycle stage and their investment needs and goals. Consider the three scenarios below:
|Scenario 1 John is 25 years old, finished varsity and just started his first job. He is thinking about early retirement in 30 years. His discussion with his financial adviser will revolve around a mix of high risk and a smaller conservative portion that considers a guaranteed solution with potential for upside if the markets perform well.||Scenario 2 Wendy is 45 years old, she has some money saved for a car for her son when he goes to varsity in five years. She is very wary of losing this money in the market. Her discussion with her financial adviser will entail taking a cautious approach with an investment that can offer guaranteed growth no matter what happens in the market.||Scenario 3 Mr & Mrs Smith are ready to retire and they want an income for as long as they live. The kids are well off, so they don’t need to leave any money behind. Their adviser suggests a life annuity with a joint-life option that will pay them an income for as long as they both live.|
|Possible solution Momentum Enhanced Growth Option||Possible solution Linked Endowment Growth Option||Possible solution Joint-life annuity|
These are three scenarios and three possible solutions to illustrate the role guaranteed solutions can play in your life. There are many more guaranteed investment solutions available from Momentum Investments that you can discuss with your financial adviser to suit your specific needs.
The role of your financial adviser
A financial adviser is an essential partner to investors during these uncertain times. An adviser can help you avoid making emotional decisions so that you do not take on unnecessary risks and make costly mistakes. Financial advisers will help you identify the best guaranteed investment solution that matches your long-term investment goals.
Nothing is more personal to you than your income, investment growth and peace of mind. We have the guaranteed investment solutions you need to include in your diversified investment portfolio. Because with us, investing is personal.
For more information go to www.momentum.co.za/guaranteed-solutions
1 Moments with our investment gurus – October 2020
The information in this document is for general information purposes and not intended to be an invitation to invest, professional advice or financial services under the Financial Advisory and Intermediary Services Act, 2002. Neither Momentum Wealth (Pty) Ltd, Guardrisk Life Limited, Momentum Metropolitan Life Limited nor any of their subsidiaries or affiliates make any express or implied warranty about the accuracy of the information herein. The Momentum Enhanced Growth Option and Linked Endowment Growth Option are life insurance products, underwritten by Guardrisk Life Limited, a licensed life insurer under the Insurance Act and administered by Momentum Wealth (Pty) Ltd. Momentum Annuities are life insurance products, underwritten by Momentum Metropolitan Life Limited, a licensed life insurer under the Insurance Act and administered by Momentum Wealth (Pty) Ltd.
Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider. (FSP 6406)
Momentum Wealth (Pty) Ltd (FSP 657) and Guardrisk Life Limited (FSP 76) are authorised financial services providers and part of Momentum Metropolitan Holdings Limited.