Investing for when you are older and no longer able to work allows you to "save" money for your retirement.
It is prudent to determine the time horizon for investing in a particular portfolio and the reason for purchasing it. The important question is whether the investor is trying to meet short, medium or long-term goals.
Practical tips to assist investors:
Investment term: The period of investment will determine the level of risk of capital loss an investor is willing to assume. The old saying "It's not timing the market, but time in the market" matters in this instance.
Risk tolerance: The investor needs to determine how tolerant he or she is to a sudden drop in their accumulated investment value. Again, time will also play a role.
Costs: The total expense ratio (TER) should be analysed as this will have an impact on the investment growth and, therefore, wealth creation.
Liquidity: The investment portfolio should be determined in relation to the flexibility of early withdrawal should the need arise. Some portfolios have lock-in periods and a penalty for early withdrawal.
Tax: Every investment has tax implications. You will either be taxed directly or indirectly within a particular portfolio.
Inflation: This erodes the capital value. The desired investment portfolio should be assessed in terms of its targeted inflation objectives.
Sekese is a certified financial planner and member of the Financial Planning Institute (www.fpi.co.za)
Winning formulae for a successful financial journey
Just like an athlete winning medals, championing your financial future with a suitable investment portfolio is best executed when you have a credible coach like a certified financial planner.
Investment portfolios are fundamental to wealth generation. There are a number of options, making it a challenge for investors to make an optimal decision.
For example, there are more than 900 collective investment schemes (unit trusts) in SA.
There are subtle differences between savings and investments.
Savings enable you to plan for your future and that of your family. You may wish to own a home by saving for a deposit. You may also want to save to pay for your children to study at tertiary level.
Generally, investments use your money to make more money. Instead of spending your extra money, you invest it, either regularly or as and when you have money to invest.
Is your partner cheating on you, financially?
Investing for when you are older and no longer able to work allows you to "save" money for your retirement.
It is prudent to determine the time horizon for investing in a particular portfolio and the reason for purchasing it. The important question is whether the investor is trying to meet short, medium or long-term goals.
Practical tips to assist investors:
Investment term: The period of investment will determine the level of risk of capital loss an investor is willing to assume. The old saying "It's not timing the market, but time in the market" matters in this instance.
Risk tolerance: The investor needs to determine how tolerant he or she is to a sudden drop in their accumulated investment value. Again, time will also play a role.
Costs: The total expense ratio (TER) should be analysed as this will have an impact on the investment growth and, therefore, wealth creation.
Liquidity: The investment portfolio should be determined in relation to the flexibility of early withdrawal should the need arise. Some portfolios have lock-in periods and a penalty for early withdrawal.
Tax: Every investment has tax implications. You will either be taxed directly or indirectly within a particular portfolio.
Inflation: This erodes the capital value. The desired investment portfolio should be assessed in terms of its targeted inflation objectives.
Sekese is a certified financial planner and member of the Financial Planning Institute (www.fpi.co.za)
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