Bundles are a great way of taking the guesswork and effort out of investing and provide a set-and-forget solution to achieving your desired returns!
Bundles in a nutshell:
These are essentially a group of shares chosen and managed by the best managers in the country. Bundle managers conduct ongoing research in the markets and alter the bundles' constituents as well as their weightings accordingly, such that they are able to achieve the best possible returns in accordance with their strategy and benchmarks
For the convenience, you will pay a small bundle fee which is calculated as a percentage of the value of the bundle.
With such a wide variety of Bundles to choose from, one can easily become overwhelmed and confused. Here are a few things you should consider to aid you in selecting the perfect Bundle to suit your investment needs.
As the old adage goes, “high risk, high reward!”. This is true in investments as, more often than not, the shares that could provide you with the highest potential profit could also deal you a hefty loss. Figuring out if you’re willing to take a chance in hopes that the reward will be great or if you would rather play it safe is crucial to choosing the right Bundle.
One of the best, and easiest, ways of realizing how risk-averse you are is by using the Riskalyse platform! Simply answer a few questions about yourself and how aggressive or conservative you are, and you will be issued with a corresponding risk number. You can match your risk number with the range provided in the Bundles thumbnail and/ or description as this is a good indication of how well suited the Bundle is to your risk profile.
You can also gauge a Bundle’s risk by its strategy. Generally, you will find that higher risk Bundles will have higher benchmarks and a higher equity allocation, whereas lower-risk Bundles will have a lower benchmark and higher exposure to bonds and cash.
The benchmark is the goal for a Bundle’s return as set by the manager. A Bundle will either strive to match or outperform a certain index, e.g JSE Top 40 Index, or it will endeavour to protect the initial investment amount against inflation and outperform it by a stipulated percentage, e.g CPI+3, CPI+5, and CPI+7.
When taking into account your desired return and matching it to the benchmark of a Bundle, keep in mind that the higher the goal is, the higher the risk is!
Your investment horizon is the length of time you are prepared to remain invested in a certain portfolio for.
In a Bundles description, you will find a recommended investment horizon. This is a length of time suggested by the Bundle manager and it will more commonly align with the return benchmark for that particular Bundle. For example, the RISE CPI+7 discretionary bundle targets a return of the Consumer Price Index plus 7% over a rolling 7 year period and the recommended investment horizon is a minimum of 7 years. This means that the Bundle aims to reach its return goal after 7 years.
It is advisable to stick to a Bundles recommended investment horizon so as to reap it’s maximum rewards, however, should you need to withdraw the funds before then, they will be available to you.
Bundle fees and transaction costs:
Bundle fees are the fees you pay to be invested in one of the Bundles. These fees are the Bundle management fees. The most that you could pay right now is approximately 1.3%. This is an annual fee that is deducted over 12 months. There is also a transaction cost that is payable upon purchasing the Bundle.
Even though the amount seems small, the costs add up, and in Bundles where the returns aren’t very high, a somewhat significant amount could go towards bundle fees. Hence, fees are one of the most important considerations when choosing a bundle.
The fewer fees you pay, the more money is left to invest and grow!
These people are the captains on our investment journey! They call the shots when it comes to what investment instruments make up the bundle as well as how much of your money is allocated to each. Bundle managers conduct ongoing research in the markets and make sure that the Bundle is as well-positioned as possible to reach its targeted return. Their reward for all their hard work are the Bundle fees that you pay for being invested in their Bundle.
Going with a manager you know might not be enough to ensure you’re getting the best return on your Bundle investment. One should instead do research on the managers to ensure that they are amongst the best in their field.
A good way of gauging a manager's performance is by looking at the historical performance of the Bundles that they manage. Chances are that if they were able to consistently match or outperform their benchmark, there’s a very good chance that they will be able to do it in the future. This can be seen on the Bundles fact sheets that can be viewed on the Easy Equities platform or the Bundle managers website.
Comparing various Bundles:
Once you have considered the above and narrowed down the list to but a few of the wide range provided to you, comparing the Bundles that are best suited to you and singling out one is the final step!
This is made ever so easy on with the Bundle comparison feature on wealth.easyequities.co.za. Simply go to the Bundle finder and select up to three Bundles at a time and view a side by side comparison of your selected Bundles.
Once you feel that you have found “the one”, simply invest and let your money work for you!
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