Pay yourself first before you pay anyone else!
It can be a daunting task to decide on where to put your hard-earned money! After all, the aim of investing to get real growth at the end of the day. It is critical that your investment decisions need to be part of your financial plan.
With the help of your financial adviser, you should select appropriate investment vehicles and monitor the progress.
What is meant by “real growth”?
This is simply the money that you make over and above inflation. Inflation is currently around 4%, so you need to aim for returns of at least 4% and higher on your investments, so that your money does not lose buying power.
Should I be investing in shares?
Shares generally outperform inflation over the longer term, however, they are fairly volatile. This means that the returns they deliver can vary greatly from year to year. If you are prepared to invest for a longer period of time, then you should include shares in your investment portfolio, as you will be able to ride out the highs and lows.
Most individuals cannot invest directly onto the stock market, for a number of reasons – the most obvious being what shares to buy and when to buy and sell. The answer is to invest via a reputable unit trust company, where groups of shares are “packaged” and managed on behalf of clients by experts. Clients then buy these “units”, and have team of portfolio managers managing their investment.
What about cash in the bank?
Banks offer fixed interest rates, and this rate may be lower than inflation. This type of investment is best suited to shorter terms, as it also allows you more liquidity than some longer- term investments - you are able to access money if you need it at fairly short notice. It is for this reason that a well balanced portfolio should include some cash in the bank.
Is property a good investment?
With the dramatic increase in property prices over the past 18 months, many people have bought properties with a view to renting it out, and selling it at some future date for a tidy profit! Many people have had the same idea, so the available properties for rent has increased, putting some downward pressure on the rental income that can be obtained. Also, maintenance costs need to be considered, as well as legislation protecting tenants from eviction. Lastly, there may be Capital Gains Tax payable on the profit made when the property is sold. Using property as a long-term investment means takes thorough homework, and is not for the feint-hearted!
Bottom line: talk to your financial adviser when deciding on investment options!
If you would like a free booklet on Investment Planning, call 0860151505. Alternatively, speak to your Old Mutual adviser or broker today!
Sylvia is currently Market Development Manager at Old Mutual, focussing on financial issues that affect women. She has been with Old Mutual for a number of years, after completing a Business Science Marketing (Hons) degree from UCT in the late 1980’s.
It is her quest to empower women to create their own futures, by taking charge of their finances. Financial empowerment is every woman’s right, according to Sylvia. She has also recently written a chapter on financial planning in Mary-Ann Shearer’s latest book, “Take Control the Natural Way”, which Sylvia believes will spread the financial empowerment message even further.
