..but is it ART? We share with you some of the least exciting to the most daring investments know to man.
Before you begin to invest you should spend a few minutes reading and understanding some basics but important aspects of investing.
Also contact us to find out how you can get 12.5% extra on your investment of R500 000 and more
Investment Types
Cash investments
These are short-term debt instruments, or IOUs, that you can convert to cash, with little or no penalty. Examples of these cash investments are: money market unit trusts, certificates of deposits (CDs), Treasury, bills and BA (Bankers acceptances).
These investments are viewed as safe investments but over time their returns have only slightly exceeded the rate of inflation.
Bonds
Bonds are loans that investors make to corporations and governments. The lenders earn interest and borrowers get the cash they need.
Public sector fixed-interest securities are known as “gilt-edged” securities (or “gilts”) when they refer to government stocks, and “semi gilts” when they refer to the stock of the lower ranking public bodies such as municipalities or public enterprises. The rate at which interest is paid and the amount of each payment is fixed at the time the bond is offered for sale.
A bonds coupon rate (interest rate) is competitive which means the rate it pays is comparable to what other bonds being issued at the same time are paying.
The coupon rate is one of the parameters used to determine the consideration (price) paid for the bond. Interest rates have a direct impact on the price paid for bonds. The value of a bond often increases as interest rates drop and decrease in value when they increase.
Shares
A company share is normally defined as any number of equal indivisible rights or interests in the management, profit and ultimate assets of a company constituting the property of those who own it and being evidenced by a certificate.
Shares are sometimes referred to as equities – hence the equity market as opposed to the fixed-interest market.
If the Company prospers, you as the investor will share in its profits and benefit from any rise in the market value of its stock. Conversely, if the company runs into problems the value of your stock will drop.
Shares are considered more risky than bonds or cash.
If you are investing for the long term, you ought to invest in shares as shares have historically outperformed other investments.
Property
Property probably has been an investment since the first rain. There are a variety of ways to invest in property. Listed property, commercial, domestic and various syndications is just a few ways of looking at property investments.
Like most investments there are advantages and disadvantages investing in different forms of property. So what should you consider when investing in property?
Liquidity – Listed property has the most liquidity and flexibility in down turns. Money in bonds is sometimes not accessible and could cause financial losses. Proper planning and cash flow are of importance.
Growth – In order to see the real return of property, one should look at measurements of the yield and not mere the valuation of an agent or the bank. In order to get the yield of an investment, all costs should be taken in account.
Management – All investment classes (even cash) have management costs including your own time and efforts invested in your buy to let property.
Business
Business is also a form of investment and is mostly class as higher risks measured against higher returns. If we look at equities on the markets, your money would be invested in large companies managed by directors. In this case liquidity is mostly available depending on the vehicle you use to invest in these funds.
Running your own business or investing in someone who have a business could be very profitable; however the skills and knowledge, risks and effort should be taken in consideration.
If you would like more investment advise click here
Retirement planning is the process of identifying your wants and needs, developing plans to achieve them, acting on those plans and continually reviewing and revising them as you gain new knowledge and experience.
In future good retirement planning will create the great dividing line in society, separating the “haves” from the “have-nots”.
Thanks to the advances in health care and nutrition, the life span of the average South Africa has increased dramatically. A longer life expectancy increases the likelihood that you will be able to work longer but you will also need to save more for your retirement. Putting money away for retirement is a postponement of gratification.
Your retirement plan will most probably be the largest investment you will ever make.
How much is enough?
The big question is how much money does a person have to amass for a comfortable retirement? This is difficult to answer as it depends on individual expectations on retirement, e.g. different lifestyles, age at retirement and life expectancy. In addition, there are unpredictable factors such as inflation and investment performance to consider. A possible indication of one’s needs can be predicted in relation to an individual’s final salary.
Your expenses at retirement
- When planning you should also consider your expenses during retirement. Let’s take a careful look at these.
- Medical costs – these costs will escalate as you get older. It is estimated that eighty percent of your medical costs will be paid in the last eighteen months of your life.
- Travel – you now have the time to travel.
- Grandparent – you could end up helping your parents with medical bills and living expenses.
- Children – your children may need assistance.
- Utilities – as you will spend more time at home these costs could increase.
- Security – you would most probably need to spend more as you get older. It may force you to buy a townhouse that is far more secure.
- Sport and social clubs – membership to golf and bowling clubs.
On the positive side the following costs should decrease:
- Insurance – car insurance and public transport costs.
- Pensioners will pay lower transport costs and entrance fees into certain places, e.g. Botanical gardens and movies.
- Retirement investments – you will now no longer be saving for retirement.
- Bond – your bond should be paid up.
- Car – your car should be paid for.
- Daily expenses – you will tend to stay at home and not spend as much time travelling to and from work. Your need for suits, work clothes, lunches and other work-related expenses will come to an end.
