Answer:
At the moment it appears that all your investment capital is in unit trusts. While I am a big fan of unit trusts as an investment vehicle, the key to a good investment strategy is diversification.

The term 'asset allocation' is one of the buzzwords of the financial advisory community. Simply put, it means the process of deciding how much to invest in different types of investment options. For example, your liquid portfolio could consist of stocks, bonds and cash while your long-term (less liquid) portfolio may consist of property and unit trust linked retirement annuities and unit trusts.

When you have finally eliminated all of your debt, paying attention to this element of your investment strategy is very important.

Astute asset allocation means that you diversify your asset categories. Diversification means you never put all your eggs in one basket. Since different asset classes rarely move in tandem, when one asset category moves down, another may move up. If you have a mixed bag of investments the overall return on your portfolio should remain positive if a particular sector takes a turn for the worse.

Ask lots of questions

Asset allocation can be straightforward and with a little education, and lots of questions you will soon learn the principles. An effective portfolio can be constructed using stocks (for long-term growth), bonds (for income and less risk) and cash (for liquidity), with the stock allocation further divided between growth companies in different industries.

Offshore investments should not be ignored as they provide a hedge against the volatility of the rand. Global investing can be tricky though because you do not have easy access to information regarding the investment. In addition, because of the relative newness of global investments, most of our local brokers do not have adequate knowledge. If you are in doubt, rather stick to locally managed international unit trusts.

The next step in your asset allocation is to figure out what percentage of your money to allocate to each category. Factors to consider are years from retirement, overall goals and your tolerance for the day-to-day fluctuations of the stock market.

Take risks

If you’re investing for the long term and still have 30 years to retirement, then you can afford to take on a higher risk profile. So you would go for a heavier weighting in stocks and unit trusts which invest in equities.

If you are closer to retirement and you have current income needs, you might allocate a higher percentage of your assets to money market funds, bonds or low-risk unit trusts.

You will need to review and perhaps 'fine-tune' your portfolio every year since your allocation targets or actual portfolio make-up are each likely to change, depending upon changes in your personal situation or the performance of your investments.

Asset allocation is very important, but it does not have to be complicated: choose your asset categories, choose your target percentages and fine-tune periodically.