Four steps to creating long-term wealth through uncertainty

If you have not revisited your financial plan recently, Savings Month – observed annually in South Africa in July – is a good opportunity to do so, says Madaleen Janse van Rensburg, regional manager from Allan Gray.

A first job brings a first pay cheque and, for many, a first attempt at saving. Then life accelerates: potentially a first car, a first home, marriage or partnership, children, career changes and possible relocations. Later, attention turns to supporting ageing parents and preparing for retirement.

“These events – although described as a chain – rarely happen in neat sequence. In addition, there are trade-offs and unforeseen turns at different life stages, culminating in a question of ‘Will I have enough?’,” says Madaleen Janse van Rensburg, regional manager from Allan Gray.

She explains that it is this personal reality – not only markets – that stirs up uncertainty, derailing even well-intentioned investors.

“It is natural to feel defeated in moments when things don’t go as planned, or the ‘right’ path is unclear. But investors should take heart that in investing, progress comes less from perfect decisions and more from consistently good ones, repeated over time.”

Below, Janse van Rensburg shares four timeless steps that can help investors create long-term wealth.

Step #1: Put a plan in place
A plan is one of the most important components of creating wealth, as it outlines how you intend to achieve your goals and links financial decisions back to long-term life aspirations rather than short-term market noise.

“A financial plan is not only a strong signal of intention, but it also provides direction when decisions feel urgent and perspective when emotions are heightened,” she explains.

Step #2: Start early
Janse van Rensburg says that the earlier an investment can start in a life cycle, the better.

“Once lost, time cannot be recovered. Larger contributions later must work far harder than those of the early years. The first decade of investing is particularly powerful,” she says.

Consider Allan Gray research comparing two investors who each contribute R24 000 annually. Investor 1 starts investing at age 22 and contributes for only 10 years, stopping at age 31 having contributed R240 000. Investor 2 waits until age 32 to start investing but continues contributing annually until age 60, contributing a total of R696 000. Despite making far fewer contributions, the early investor accumulates more wealth: In a 10% return scenario, Investor 1 ends up with R6.1 million at age 60, compared with R3.5 million for Investor 2 (rounded off). In an 8% return scenario, Investor 1 finishes with R3.2 million, while Investor 2 accumulates R2.5 million. The research illustrates the power of compounding: Time does the heavy lifting.

“In a world of lower returns, time matters more, not less.”

Step #3: Remain invested
Remaining invested when markets are uncomfortable is as important as starting early and investing consistently.

“It is understandable to get panicked during bouts of market volatility but reacting to that by making knee-jerk investment decisions and abandoning a plan can permanently impair outcomes,” explains Janse van Rensburg.

Enter step number four…

Step #4: Seek out professional partnerships
Partnering with a skilled and reputable investment manager is key to building long-term wealth. Finding the right manager requires research: their investment philosophy and approach should resonate with you, and their offering should meet your needs.

According to Janse van Rensburg, experienced managers typically ensure that investment decisions are grounded in rigorous research and deep analysis, while asset allocation decisions are aligned to each portfolio’s objectives and risk profile.

“This allows you to benefit from professional expertise rather than carrying the burden of complex decision-making yourself,” she notes.

However, matching your investment choices to your objectives and timeframes is essential, as is adopting a long-term approach – and this is often easier said than done. Janse van Rensburg says this is where a partnership with an independent financial adviser (IFA) comes in.

“An IFA can help you make appropriate choices and avoid costly emotional decisions that can derail your long-term outcomes,” she explains.

“It is important to have regular conversations with your IFA to ensure your strategy and investment choices continue to reflect your priorities, and that the right foundations remain in place for the years ahead,” she notes.

“Behaviour, discipline and time have shaped outcomes across generations. Regardless of the context, following these timeless steps should improve yours,” Janse van Rensburg concludes.