“You have to be in it to win,” as the popular saying goes, but your financial future doesn’t have to be a gamble. Just as you should go to a doctor to take care of your physical needs, so should the health of your savings.

It is imperative to consult an independent financial advisor to help you reach your savings goals. The Southern African Financial Intermediaries Association (FIA) maintains that financial advisers are important, given the complex nature of investment and risk products. This makes it “difficult for a consumer to structure a product portfolio that meets all of their needs.

“A good financial advisor will take a complete picture of your financial needs and help you structure a portfolio of investment and risk products that matches your income and stage in your life. A financial advisor can offer valuable advice when critical financial decisions need to be made and often deters clients from making reckless decisions with costly consequences, ”says the FIA.

The abundance of content and overwhelming media coverage in the public domain about the investment options available blurs the water for the layman, making it very difficult to get started. But a licensed (with the Financial Services Conduct Authority) and qualified practitioner will help you navigate the maze of product choices and answer all of your questions, including: should I invest in an exchange-traded fund (ETF) or an unit trust? Should I consider investing in the money market or sticking with a Tax-Free Savings Account (TFSA)? Which retirement product should I choose? Where is offshore investment located? Should investors be exposed to all options or stick to one or two? What about the property? How does it all fit together?

If you think it’s just a matter of finding the best performer, that’s a mistake. For example, some published performance charts on mutual funds look at, say, five-year return numbers and many investors then choose to invest in a mutual fund, based on this fact – without considering what the underlying investments are or objectively considering whether the perceived high returns are likely to continue. Other investors think that “anything other than money in the bank is just ‘too risky'” and prefer money market investment options. It just doesn’t make sense to look at the individual products in your portfolio in isolation.

This is where the advice of an advisor becomes invaluable. A good place to start is for you and your planner to take stock of your financial situation. Evaluate your goals and what the future might hold for you, and consider your experience and attitudes. Next, identify the money available. The process by which you collect this information is called “fact finding” – this allows you to be more prepared to put together your future financial plan.

The next phase is to determine the time horizon of your investment. You have to think about how long you have to get your money back. Time frames vary for different purposes and will affect the type of risks you can take. For example, if you are saving for a real estate deposit and hope to buy in a few years, investments such as local equity funds or offshore portfolios will not be suitable as their value goes up or down and is considered a longer investment. -term. Stick to cash savings accounts like money market funds or even a TFSA. If you’re saving for retirement in 25 years, you can ignore short-term drops in the value of your investments and focus on the long term. Over the long term, retirement products, real estate investments, or collective investments other than cash savings accounts tend to give you a better chance of beating inflation and reaching your retirement goal.

Once you’ve clearly defined your needs and goals – and assessed the level of risk you can take – develop an investment plan. This will help you identify the types of products that might be right for you. Your advisor will help you understand what is available and what the role of each product is in your overall savings strategy.

Here are some of the options:

  • SICAV: You can invest in mutual funds for most of your financial goals, from saving for your long-term needs to achieving your short-term goals. You can access your money anytime and make changes to your investment whenever you need to, with no transaction fees or penalties.
  • AND F : You can trade index funds like stocks, which offer the advantage that ETFs are more liquid. They can be bought or sold at any time during trading hours and are accessible to small investors as they allow the purchase of individual stocks or portions of indices in fractional installments, while many investment trusts have minimum investment requirements.
  • Money market funds: These vehicles invest in short-term instruments with a maturity of less than one year. By keeping the deadline short, these funds attempt to reduce risk and provide liquidity.
  • Retirement products: When investing for retirement, you usually have three main options: a pension fund, a provident fund, or a retirement annuity. All benefit from some form of tax advantage and are only accessible after retirement, so this investment is long term.
  • TFSA: The new kid on the block is exempt from income tax, dividend tax or capital gains tax on returns. You can only contribute a maximum of 33,000 Rand per tax year (annual limit). There is a lifetime contribution limit of R500,000 per person.
  • Offshore portfolios: The first option is to invest directly abroad in funds domiciled abroad. When you invest in such funds, you need to convert your rand into the currency of your choice. To withdraw the money abroad, you will use your annual discretionary allowance or be able to request a tax clearance for an amount of up to R10 million.
    The second option is to invest indirectly abroad in funds denominated in rand. These funds are mandated to invest in foreign assets. You invest in rand, after which the mutual fund management company then converts the rand into foreign currency, using its foreign exchange capacity. All funds denominated in rand are valued in rand.
    You can also invest in offshore equity portfolios which are managed and reported locally or through endowments.
  • Goods (whether real buildings or classified entities): buying a property goes far beyond the simple brick and mortar. You can invest in real estate ETFs or mutual funds, put your money in real estate investment funds (REITs), or buy stocks in a real estate company. You can even buy a physical property and upgrade it for resale or buy a building and rent it by the square meter, here or abroad.

This list is long and we can delve into the intricacies of each asset class. This is proof that you need a financial advisor to unpack all this properly, and ensure that your nest egg is sufficiently diversified. The importance of managing and improving the balance between risk and return cannot be overstated enough, by spreading your money across different types and sectors of investment whose prices do not necessarily move in the same direction. This can help you smooth out returns while achieving growth and lower your overall portfolio risk, so that one day you can retire in the style you’re used to.


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