“Where should I invest my R5000 per month? Should I save the extra cash for a deposit on a property? Distribute the money across my unit trusts? Save into an ETF (domestic or offshore), buy shares online or increase my monthly RA contribution,” asks Adrienne who is 30 years old, has no dependents and no debt. She has already saved 6 months of living expenses in an emergency fund, has an endowment of R2000 per month and has R100 000 invested in 5 unit trust funds.

Maya replies: Your final comment that “maybe I should restructure my whole financial plan and consolidate all my investments into fewer ones” is a good starting point.

As you pointed out in your email, each time you met with a financial adviser they would just sell you another product and now you have a very eclectic investment portfolio with high costs and no real strategy.

First step: Consolidate your life cover

You mentioned that you were sold extra disability cover when you already cover. You should not need more than one policy as this increases your administration costs. An insurer should provide income protection, disability and dread disease cover on one policy. These are important insurances at your age as your biggest asset is your future income.

• Income protection will provide you with a monthly income if you are temporarily or permanently disabled
• A lump sum disability cover will pay out if you are permanently disabled and assists with any modifications you need to make to your life
• Dread disease (or critical illness) pays out a lump sum if you are diagnosed with a serious illness. This can act as a top up for your medical care.

Get a few quotes and see who offers the best cover at the best price.

Second step: Review your retirement funding

You currently contribute 10% of your income to a retirement annuity. If it is a flexible investment linked annuity then consider increasing that to 15%. The tax benefits are phenomenal and there is no point in wasting it.

If you are currently invested in an RA policy through an insurance company then be aware that if you stop contributing penalties may apply. Rather invest the additional money as a “top-up” than commit to a specific amount. Speak to the company or broker and make absolutely sure you are not committing to a new contract. If your broker is no longer providing you with advice inform the company as they will still be receiving on-going commission on the product.

Third step: Review your investments

You mentioned cancelling your endowment policy due to the high costs. You need to weigh that up against the surrender penalty that you will pay in cancelling it. It may make more sense to keep up the payments at this stage as they will re-coup the costs from your existing investment anyway. If an adviser recommends cancelling, ask them to do a cost analysis first.

You also mention that some of your unit trusts are on a platform which incurs additional fees. Those fees are destroying value. Rather select a good fund manager and invest directly in their flexible asset allocation fund.

Flexible funds allow the fund managers to invest in which ever assets they believe will provide the best returns and can range across equities, bonds, property, cash and offshore. Make sure you understand the mandate and that your selection is not too conservative. At your age you can afford a higher exposure to growth assets like equities and property.

You can also include an exchange traded fund like Satrix Rafi which is a “smart” index tracker as it invests in companies based on their relative valuation. This would be purely invested in equities and would therefore be more volatile; however the costs are lower than a unit trust. If you have more than R100 000 invested, it is cheaper to go through a stock broker than the investment plan.

There is a strong recommendation by fund managers at the moment to invest offshore as the relative valuations are lower than South Africa at the moment. You could invest in a rand denominated offshore fund with someone like Investec, Allan Gray or Coronation.

Be careful of spreading yourself across too many different fund managers and unit trusts as fees as a percentage of the investment reduce the larger your investment size. Rather have a strategic plan about the exposure you want and invest in a top manager in that field.

If you are considering buying shares directly on the JSE it only makes financial sense if you buy R5000 worth of a share at a time. Therefore you need a lump sum of around R20 000 in order to start a portfolio with four shares. This requires time and research. Once you have a portfolio of over R100 000 the relative costs of a share portfolio are less than a unit trust, but it is all about scale.

Fourth step: Deposit on a home

Now is a good time to start thinking about buying a home. The property market is a buyer’s market and banks are prepared to fix mortgage rates at prime for two years. If you decide to save for a deposit and you have a one year view, then a flexible fixed deposit with Capitec is a good option as it pays a high rate but allows you to add to it each month. If you are investing for more than a year consider an income fund with your unit trust fund manager.

I know you have had a bad experience with financial advisers but if you could find an adviser that is fee-based rather than charging commissions, it would be in your best interests to pay for a proper financial plan with a concrete strategy.