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Financial Planning
November 11, 2024

Six steps to evaluating potential investments

A financial plan involves strategic planning

By Adriaan Pask, CIO, PSG Wealth

Financial markets are cyclical and periods of economic downturn often present unique opportunities to achieve your desired investment outcomes. For this reason, it is important to identify solutions tailored to global market dynamics to realise wealth that spans generations.

Seizing opportunities in adverse market conditions

When market sentiment is low, asset prices tend to follow suit and creates a ripe environment for long-term investment. Using these downturns as buying opportunities, you can position for future growth when markets inevitably recover. This approach not only helps to weather the storm but also sets you up to reap the benefits of the market’s eventual rebound.

How to identify opportunities in the market

Identifying opportunities in the market requires a blend of local expertise and global awareness. Look for research on market analysis, macroeconomic trends and microeconomic conditions to help guide your decisions and speak to a financial adviser with a proven track record of offering quality advice.

Ensure that you read available research to identify sectors and assets that are poised for growth, even in challenging market conditions. This includes looking at sectors that tend to perform well during economic downturns, such as healthcare, consumer staples and utilities, as well as those poised for growth in emerging markets.

With the insights of an adviser, you can capitalise on sudden market shifts caused by geopolitical events, regulatory changes or technological innovations. By staying nimble and responsive to these changes, you will be well positioned to take advantage of emerging opportunities.

Key considerations for evaluating investment opportunities

When assessing potential investments, it is crucial to align them with your long-term financial goals. Whether you’re aiming to build enduring wealth or generate steady passive income, here are key factors to consider:

1.     Alignment with goals: Ensure investments match your objectives. For long-term wealth, diversify across equities, bonds, real estate and alternative assets. For steady income, focus on dividend stocks, real estate investment trusts (REITs) and fixed income securities.

2.     Risk tolerance: Gauge whether the investment fits your comfort level with risk and integrates well with your overall portfolio strategy.

3.     Market conditions and horizon: Factor in current economic environments and your investment timeframe, as some assets perform better under specific conditions or over certain periods.

4.     Returns, liquidity and fees: Analyse potential returns, liquidity and fees to understand their impact on your overall gains.

5.     Investment fundamentals: Review the investment’s core metrics, such as company performance and valuation, and consider tax implications.

6.     Regulatory compliance: Make sure that the investment complies with legal requirements and that you understand its tax impact, including capital gains taxes and any associated benefits or liabilities.

By carefully evaluating these aspects and working with an adviser, you can make informed decisions that align with your financial strategy and goals. Ultimately, there is no ‘one size fits all’ strategy and this reinforces the importance of getting quality financial advice.

Building a foundation for generational wealth

Building sustainable, generational wealth requires more than just capitalising on these opportunities; it demands a strategic, long-term approach that includes comprehensive financial planning, diversified investments, proactive estate planning and adaptive risk management. By focusing on these essential elements, you can establish a strong financial foundation that ensures lasting security and prosperity for future generations.

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