The stability equation done differently: Balancing risk and reward with Fedgroup
As if financial markets haven’t experienced enough volatility, the wild swinging of the political pendulum in recent months has provided another sobering reminder that – when your world is being rocked with uncertainty – it’s vital to have something stable to hold onto.
That goes double when you’re talking about the investments you’ve made to attain your financial goals for the future. Yet, there’s a tendency for investors to think that stability equates to hunkering down, sticking with the same small pool of familiar equities and bonds as always and forgoing portfolio growth to focus exclusively on preserving existing funds.
In unsettled times there’s no argument that protecting the hard-earned assets you’ve accumulated is a priority. Or that most appetites for risk should probably be curbed for the duration. Peace of mind is priceless.
However, the idea that the only way to achieve stability is to curl up like a pangolin and wait for the crisis to pass is one that our pioneering investment team challenges vehemently and we’ve got the results to prove it.
Finding the balance
Effective investing has always been about finding the appropriate balance between risk and reward and, when prevailing markets are choppy, the emphasis on stability inevitably ratches up a notch. We get it. Investment security is paramount.
But should that also mean sacrificing portfolio growth? We don’t believe it should and, happily, it’s not our clients’ experience.
Rather than adjusting an investment strategy downward to limit potential losses in volatile times, Fedgroup’s stability equation continues to solve for optimal portfolio performance.
We’re all in on the commitment to preserving existing assets but that’s not where it stops for us. Once we’re sure our investors’ basic income and liability needs are secured, we remain relentless in creating opportunities for them to generate inflation-beating returns and continue to build their wealth over the long term. No matter how vulnerable markets are.
Solving for growth
Much as it is a universal imperative for a portfolio to balance risk and reward, we view stability through a growth lens, so we go about achieving it very differently.
As a specialist financial services provider with a 30 year legacy of developing products that deliver stable, market-beating returns, we’re bold enough to venture beyond the boundaries that have governed ‘tried and trusted’ asset allocation strategies for decades.
In defiance of traditional approaches that have the potential to expose investors to higher levels of risk, we develop fresh, imaginative and effective solutions that put the emphasis on today’s twin needs for security and steady growth.
An alternative approach
It starts with our insistence on looking outside the collection of conventional listed stocks, bonds and other assets that investors are being corralled into. Not only because they are heavily oversubscribed – and the discounted prices at which they are traded means that investors don’t always see or receive true value – but more importantly because they fail to offer any real diversity, which is where opportunity for investment growth lies.
There has to be diversification in any truly balanced portfolio, if it is to spread risk, and that necessitates the inclusion of alternative investments. (Defined as assets not traded on the stock exchange).
It’s a view that’s been gaining traction since the pandemic upended global markets and, at the end of 2023, JP Morgan calculated the share of alternatives in the total asset universe to stand at 14.9%.
Incorporating alternatives is just one of the things we do differently for our clients at Fedgroup and we favour fixed-term investments, such as savings, deposits and endowment products because of the certainty they lock in for investors.
The real heavy lifting comes from the unique ways we structure those fixed-term investments so they have the stability to withstand market turbulence.
The power of creative construction
The fact that we operate under multiple licences means we are subject to stringent regulation and oversight, which comes with two very important benefits: one, it gives our clients peace of mind and, two, it gives us a flexibility most other investment houses don’t have to develop robust and resilient solutions that are innovatively built for purpose.
Then, in another unconventional move, that’s aimed at spreading risk further, we structure each investment including a mix of meticulously-selected tangible assets in high value niche sectors and private placement instruments.
Together with our prudent approach to risk management, the counter-cyclical nature of these underlying assets helps to deliver our investors market-beating returns.
The results
The product that best exemplifies this is our Secured Investment.
A five-year fixed investment of R5 000 or more that gives investors the flexibility of choosing between earning a monthly income or reinvesting their interest for even higher growth. It offers full capital security and zero fees at a competitive rate and we’re proud to say that, in over thirty years, it has outperformed most low-risk investments over the medium term and no investor has ever lost their capital or interest due.
Along with our newer Fixed Endowment, it’s largely structured from these private placement instruments because, for us, the stability equation doesn’t stop at the peace of mind that comes from protecting existing investments. That’s where it starts.
The more complete, and compelling, formula lies in the sustainable and consistent returns that provide savvy investors with stability, peace of mind, and growth.
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