Old Mutual Invest Flexible Plan Review 2024

By / August 11, 2024

The Old Mutual Invest Flexible Plan has long been a popular choice for investors seeking a balance between flexibility and […]

Old Mutual Invest Flexible Plan Review

The Old Mutual Invest Flexible Plan has long been a popular choice for investors seeking a balance between flexibility and growth potential. As we transition into 2024, it’s essential to re-evaluate this plan in the context of current market dynamics and updated information. This article will delve into the plan’s features, benefits, potential drawbacks, and its suitability for different types of investors.

Overview of the Old Mutual Invest Flexible Plan

The Old Mutual Invest Flexible Plan is a unit trust investment plan offered by the Old Mutual Investment Group. This plan provides investors with the flexibility to choose from a range of unit trusts that align with their investment goals and risk tolerance. Whether you are a conservative investor or one with an appetite for higher risk, this plan offers options that can cater to your specific needs.

As of June 2024, the plan has undergone several updates, reflecting the evolving financial landscape. Notably, it continues to allow investors to adjust their risk profiles and make additional contributions or withdrawals without incurring penalties.

Key Features

The Old Mutual Invest Flexible Plan stands out for several reasons:

  1. Investment Flexibility:
    • Investors can select from various underlying unit trusts, each tailored to different investment goals and risk profiles. The plan offers four primary risk profiles: Conservative, Moderate, Growth, and Aggressive.
    • The plan allows for easy switching between these risk profiles, enabling investors to respond to changing market conditions or personal financial needs.
  2. Minimum Investment Requirements:
    • The plan requires a minimum monthly contribution of R500 or a one-time lump sum investment of R5,000. This low entry point makes it accessible to a broad range of investors.
  3. Management Fees:
    • The annual management fee varies depending on the chosen risk profile. As of 2024, the fees are:
      • Conservative: 1.14%
      • Moderate: 1.28%
      • Growth: 1.42%
      • Aggressive: 1.56%
    • Additionally, investors must consider the underlying unit trust costs, which can vary based on the specific unit trusts selected.
  4. No Penalty Withdrawals:
    • Investors can make additional contributions or withdrawals at any time without facing penalties or fees. This feature adds a layer of liquidity, making the plan appealing to those who may need access to their funds.
  5. Tax Efficiency:
    • The plan’s structure as a unit trust investment allows for tax-efficient growth. Investors are taxed only on their investment gains rather than the underlying assets.
  6. Asset Allocation:
    • The plan invests in a diversified mix of assets, including money markets, bonds, property, and shares. Up to 45% of the portfolio may be invested offshore, including in Africa. This diverse asset allocation helps balance risk and return, aiming for long-term growth.

2024 Updates: What’s New?

In 2024, Old Mutual has introduced some changes to enhance the performance and appeal of the Flexible Plan:

  1. Performance Target:
    • The plan now targets a performance of CPI + 5% to 7% per annum (net of fees). This target is ambitious, aiming to outpace inflation significantly and provide real returns to investors.
  2. Risk Management:
    • The plan continues to prioritize lower volatility compared to the equity market, making it suitable for investors seeking long-term capital growth with some protection against short-term market fluctuations.
  3. Fund Composition:
    • As of June 2024, the fund’s asset allocation includes:
      • South African Equities: 37.7%
      • International Fixed Interest: 25.0%
      • South African Cash: 13.3%
      • International Equities: 11.0%
      • South African Bonds: 9.0%
      • South African Property: 3.8%
      • Africa (excluding SA): 0.2%
    • This diversified portfolio is designed to optimize returns while managing risk across different asset classes.
  4. Fund Performance:
    • The plan has demonstrated consistent performance with annualized returns over various periods:
      • 1-Year: 9.4%
      • 3-Year: 8.8%
      • 5-Year: 9.3%
      • Since Inception: 12.1% (for Class R)
    • These returns highlight the fund’s ability to generate steady growth over the long term.

Benefits of the Old Mutual Invest Flexible Plan

The Old Mutual Invest Flexible Plan offers several compelling benefits:

  1. Customization:
    • The ability to select from multiple risk profiles and switch between them provides investors with a high degree of control over their investment strategy. This flexibility is particularly valuable in volatile markets.
  2. Accessibility:
    • With a low minimum investment requirement, the plan is accessible to a wide range of investors, from beginners to seasoned investors looking to diversify their portfolios.
  3. Tax Efficiency:
    • The plan’s tax-efficient structure is a significant advantage, especially for investors looking to maximize their after-tax returns.
  4. Liquidity:
    • The absence of penalties for withdrawals adds an important layer of liquidity, allowing investors to access their funds when needed without incurring additional costs.
  5. Long-Term Growth Potential:
    • The fund’s diversified asset allocation and targeted performance make it a strong contender for long-term wealth accumulation.

Drawbacks to Consider

While the Old Mutual Invest Flexible Plan has many advantages, there are some drawbacks to consider:

  1. Management Fees:
    • The management fees associated with the plan, particularly for higher-risk profiles, can be relatively high. Over time, these fees can erode returns, especially in low-return environments.
  2. Complexity of Underlying Unit Trusts:
    • Investors may find it challenging to fully understand the underlying unit trusts, as the fund managers’ investment decisions are not always transparent. This lack of visibility can be a concern for those who prefer a more hands-on approach to their investments.
  3. Not Regulation 28 Compliant:
    • The fund’s higher allocation to equities makes it non-compliant with Regulation 28 of the Pension Funds Act. This means it may not be suitable for retirement savings, as it does not adhere to the restrictions on asset allocation for retirement funds.

Who Should Invest in the Old Mutual Invest Flexible Plan?

The Old Mutual Invest Flexible Plan is best suited for investors who:

  • Seek long-term capital growth and are willing to accept some level of risk.
  • Want flexibility in adjusting their investment strategy as their financial situation or market conditions change.
  • Are looking for a tax-efficient investment vehicle.
  • Need the ability to make additional contributions or withdrawals without penalties.

However, it may not be ideal for those who prioritize low fees or require a high level of transparency in their investment choices.

Conclusion

The Old Mutual Invest Flexible Plan remains a robust investment option in 2024, offering a blend of flexibility, growth potential, and tax efficiency. While there are some drawbacks, particularly related to fees and transparency, the plan’s benefits, such as its customizable risk profiles and liquidity, make it a compelling choice for a wide range of investors.

As always, potential investors should carefully consider their investment goals, risk tolerance, and the associated costs before committing to the plan. Consulting with a financial advisor can also help ensure that the Old Mutual Invest Flexible Plan aligns with your long-term financial strategy.