By: Fareeya Adam, Head of Retail Product Solutions at Momentum Investments
Achieving high-risk returns and retaining the certainty of guarantees is possible
Will Trump serve a second term or is this Biden’s race to win? Predicting election results and the market’s reaction to it is a futile exercise, but our brains are hard-wired to seek certainty. We tend to struggle with the many unknowns that typically come with US election frenzy and with the looming uncertainty of how markets will react. The standard risk-return investment tradeoff can even become skewed by the unpredictability and macroeconomic importance placed on the outcome of one single event.
We have all heard the saying, when the United States sneezes the world gets a cold. For South African investors, fears over the potential loss of capital and fluctuating global markets are at the forefront of discussions in the days leading up to the US elections.
We believe that creating a basket of diverse solutions should be a priority for South African investors. Markets are volatile – locally and globally, not only because of the upcoming elections but also because of the uncertainty around a vaccine for Covid-19 and the long-term effect of the pandemic on economies.
Investors are increasingly seeking diversification through global exposure to achieve growth while maintaining a degree of certainty. Not all investors are the same and it is therefore critical that each investor is exposed to the right type of investment solution for their specific circumstances and risk appetite. Whether that is in equities, money markets or guaranteed products will depend on their defined investment profile and needs.
Any degree of certainty of return is characteristically perceived to limit an investor’s potential for return. As much as people want certainty, any astute investor will tell you that the more risk you take, the more upside potential there is for higher returns.
This is why structured products are considered to be a niche set of solutions for investors seeking high-returns. Investors are aware that if markets run and grow more than expected, a structured solution with a specific guaranteed return will not provide the level of return that would have been possible with a higher degree of risk involved.
However, the flipside of this story is that, if there is a sudden market downturn, a structured product will provide valuable capital protection from extreme volatility.
This is the driving motivation behind the Momentum Enhanced Growth Option – a structured investment product that challenges conventional investment thinking that assumes that higher returns are only possible through exposure to higher risk.
The Momentum Enhanced Growth Option is suitable for an investor looking for growth through exposure to a global index, without the risk of losing money. By offering a secured return of 15% over five years, as well as an enhanced allocation of 3% upfront at the trade date of the investment plus unlimited enhanced growth potential through a multiplier effect, the Momentum Enhanced Growth Option is a solution that offers the best of both worlds in the current uncertain economic landscape.
The Momentum Enhanced Growth Option is available to both individual investors and trusts with natural persons as beneficiaries, with a minimum investment amount of R50 000.
Investors looking for growth through exposure to a global index without the risk of losing money and the benefit of unlimited upside potential may consider the Momentum Enhanced Growth Option as part of their overall investment strategy.
For more information speak to your financial adviser or go to momentum.co.za/MEGO.
The information in this document is for general information purposes and not an invitation or solicitation to invest. The information is not intended to be accounting, tax, investment, legal or other professional advice or services as set out in the Financial Advisory and Intermediary Services Act 37 of 2002 (Fais), or otherwise. The information in this document, including opinions expressed, is derived from proprietary and non-proprietary sources that Momentum deems reliable, and is not necessarily all-inclusive but is accurate at the publication date. While we make all reasonable attempts to ensure the accuracy of the information in this document, neither Momentum Wealth (Pty) Ltd, Guardrisk Life Limited, Momentum Metropolitan Life Limited nor any of their respective subsidiaries or affiliates make any express or implied warranty about the accuracy of the information in this document. Past performance is not necessarily a guide to future returns. Financial advisers should conduct a suitability analysis and due diligence with clients on the investments mentioned in this document as part of their investment mandate and investment advice process. Terms apply. Available from your financial adviser and Momentum.
The Momentum Enhanced Growth Option is a life insurance product, underwritten by Guardrisk 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.