QUESTION: When I just started working, I was motivated by your columns to get my finances in order. It has been three years since I first wrote you and a lot has changed. I finished paying my student loan, switched my pension savings from one pension fund manager to another, and opened a professionally managed personalised investment plan.
My next goal is home ownership and diversifying my portfolio because those feel like the next step to financial stability. The money that I would pay monthly towards my loan is now free, and I am looking at three companies that seem to be in the business of building wealth through investment.
I would like your opinion on what types of questions to ask when selecting one of those companies. Do I need to invest in a product that provides a dividend? Is the stock market doing well enough to start investing now, or is it doing so well it makes no sense to start now? Are any of those companies even going to help with me becoming a home owner?
– Kadeen
FINANCIAL ADVISER: Yours is a beautiful story, and I feel confident that you will continue on the path you have taken and will do well. I like the fact that you know what your next goal is and that you see the merits of having a diversified investment portfolio.
It would be good if you are able to set a realistic time frame within which you would like to own your own home as it would help you be more focused and give you a greater sense of how much to save and invest and the level of return that would be necessary.
You have already entrusted some of your funds to professional investment managers, and it is quite commendable that you now want to invest the funds that have been released now that you have liquidated your student loan.
The companies you have mentioned are all stockbrokers, and it seems that your preference is to allow them to manage the new portfolio you want to set up. Not all stockbrokers offer that service. You should make every effort to know the make-up of your present portfolio so that the new portfolio does not become a mirror image of it.
The benefit of having a second portfolio is that it adds another level of diversification, that is, diversification by management. Different managers have different philosophies and approaches to investing. They also have different interests and competencies, which may be reflected in the research and other services they provide.
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