Beware of being over diversified

Vanshen writes: I have R600 to invest monthly and don’t know where to invest.

I currently have the following investments:

  • An RA
  • Two 10 year saving policies maturing in 2019 and 2021
  • Allan Gray Balanced Fund investment
  • Satrix 40
  • Satrix Divi

Should I take the Satrix SWIX and Satrix Rafi or invest in a SA property fund, a value fund or just put it in a money market fund? I’m looking at diversifying my portfolio but want something that I can get good returns in about 3-5 years.

Maya replies: An important point to remember when investing is costs. For every new investment you take out you incur additional costs. You should rather look to consolidate than spread yourself too thinly.

Your RA and Allan Gray Balanced Fund will have similar asset allocations so you are diversifying across fund managers rather than assets. I am not sure what the underlying investments are in your savings policies but they will have the same profile as either the Allan Gray and RA or Satrix 40.

You probably also have exposure to listed property through your RA and Allan Gray Balanced fund.

The Satrix SWIX will lower your exposure to resources relative to Satrix 40 but would probably be fairly similar in exposure to the equity portion of Allan Gray and your RA.

The Satrix Rafi will be fairly similar to the Satrix Divi in that it also considers dividend yield when constructing the index. So you none of those options really increase your diversification except through managers and increasing costs.

If you are looking at a three to five year investment period then increasing your Allan Gray Balanced Fund would probably be the best option in this more volatile market. You need to take a five to ten year view on your pure equity investments.

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Maya Fisher French
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