It is advisable to invest money for longer periods

Investors should plan to keep their money in equity markets for at least five years.

Investors should plan to keep their money in equity markets for at least five years.

With the recent volatility in markets, an even longer period of about seven years should be considered a reasonable period.

So what should investors do if they plan to invest money for a shorter period? The only way to answer that would be to know why the investment is being made for a short time

Security of your capital might be your paramount concern. Many investors in this position would rather go without than touch their investment. But this reasoning could lead to bad decisions, because you are focusing on sentiment rather than on a sound strategic reason.

If an investor needs an income from the investment, then security and certainty are essential concerns - and equities are unlikely to figure in the answer.

A fixed deposit or money market investment might be suitable. These investments are secure, but the return is uncertain because rates fluctuate and taxes will often have to be paid on the proceeds.

Inflation is on the increase and prices are rising. Those who live off the interest of their investments know how these factors affect their lifestyle.

The rule of 72 helps you understand the effect of inflation. Divide 72 by the rate of inflation to calculate the number of years in which the purchasing power of the rand will halve.

At an inflation rate of 7,2percent - 72 divided by 7,2 > 10 - R100 then will buy only R50 of goods at today's prices.

Over the past five years money-market interest rates have fluctuated between highs of 22percent, back to 7percent and now between 9,5percent and 10percent.

Investors who do not need to use their capital, but who fear taking risk, often repeatedly make six-to-12-month decisions, driven by the constant concern that they might need instant cash. But making the same short-term decision 10 times is equivalent to making a single long-term decision over five to seven years.

So investors in this position should be thinking differently from the outset.

Next time you are faced with the same investment decision you made previously, stop and consider your objective.

l Bryan Hirsch is chief executive of Pioneer Financial Planning. Visit or e-mail for more information.