Revamp Your Finances This Spring: A Season for Renewal and Growth

As September rolls in across South Africa, the lively signs of spring start to appear. Mornings turn warmer, flowers begin to blossom, and a revitalizing sense of renewal fills the atmosphere. This season has traditionally encouraged us to declutter our homes, tuck away our winter attire, and partake in the customary practice of spring cleaning.

As we refresh our living environments, it’s essential to reflect: when was the last time you thoroughly reviewed your finances?

Just as our closets tend to gather unnecessary items, investment portfolios can become unbalanced or misaligned with individual goals. Spring is the perfect time to pause, reassess, and ensure your portfolio is properly diversified and aligns with your risk tolerance.

Diversification, put simply, means not placing all your eggs in one basket; it entails spreading investments across different asset types, sectors, and geographical locations to minimize potential losses. However, it’s not solely about having various assets; achieving balance is critical for ensuring your investments effectively contribute to your personal objectives.

Risk is a subjective notion. In the realm of finance, it signifies the chance that actual returns may differ from your expectations. For many investors, the immediate fear of short-term losses is termed volatility risk. However, there is also a long-term risk: that your investments might lag behind inflation.

While shifting significantly into cash might seem comforting, inflation gradually diminishes its value over time. This underscores the importance of understanding real return!

What is real return?

It refers to the growth of your investment after factoring in inflation and taxes. Understanding this concept is vital for creating a portfolio that not only withstands challenges but thrives.

Let’s dive into a few conventional diversification strategies:

• Cash often serves as a security blanket for many South Africans. It appears stable, liquid, and predictable, yet high inflation can yield negative real returns. An emergency fund is essential, but excessive reliance on cash can erode purchasing power.
• Bonds provide steady income, are typically less volatile than stocks, and offer some stability during market swings. However, bonds are also vulnerable to inflation, which can diminish their value, and to rising interest rates that can lower their prices. While South African government bonds may present attractive yields, they should be evaluated carefully against inflation and tax implications.
• Equities are the growth engine of any investment portfolio. They provide dividends and capital appreciation, although their prices can experience significant swings during uncertain times. Recent examples include the market turbulence surrounding Covid-19 in 2020 and the Trump tariff announcement in April 2025.

While unsettling, historical data shows that long-term investors usually receive higher real returns from equities compared to cash or bonds. The real challenge is managing this volatility—both in the markets and our emotions. Diversifying across sectors and regions helps manage these fluctuations, but maintaining discipline is crucial to remaining invested through market cycles.

A well-rounded portfolio reaches beyond South Africa’s borders.

Investing offshore opens up access to industries and opportunities not readily available locally, while also reducing exposure to local issues. However, offshore investments carry their own risks, such as fluctuating currencies and global political uncertainties.

In today’s interconnected world, regional diversification is increasingly important.

Unit trusts and exchange-traded funds (ETFs) have become popular tools for diversification. These pooled products provide access to a range of assets within a single investment, but it’s crucial to understand their underlying composition. For instance, a local equity fund might focus heavily on a few major JSE players, while a tech ETF may predominantly target US stocks. True diversification involves looking past the labels to ensure your investments are broad and complementary.

No investment is free from risk.

Cash faces the risk of inflation, bonds are susceptible to interest rate changes, and equities can be volatile. Even balanced funds, designed to mix asset classes, can’t eliminate risk, only lessen it. Inflation remains a subtle risk, gradually eroding the value of money over time. A seemingly safe strategy today, like holding too much cash, could render you worse off in the future if returns don’t keep pace with inflation.

Spring cleaning your finances means taking stock, ensuring your portfolio aligns with your objectives, and confirming it’s diversified to effectively meet your needs. While investing is a personal journey, it’s not one you should take alone.

According to the Momentum Financial Advice Research Report (2024), the impact of professional advice on household wealth is significant: “Research by the Bureau of Market Research, in collaboration with Momentum, indicates that households with a financial advisor typically amass investment portfolios 9.5 times larger than those lacking professional guidance. This highlights the long-term value of financial advice.”

A reliable financial partner can help you navigate market fluctuations, understand tax implications, and spot global opportunities, making your investment journey smoother and more rewarding.

Just as spring rejuvenates nature, let this season revitalize your finances. Clear away the clutter, rebalance where necessary, and lay the groundwork for growth in the coming seasons.

Heidi Saayman is a portfolio manager at Sasfin Wealth.

Brought to you by Sasfin Wealth.

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