INVESTING
Let Your Money Make More Money
What is investing?
This is the act of buying an asset or item with the goal to generate income or appreciation in value. Investing involves putting capital to use today, in order to increase its value over a period of time. While investing is aimed at the potential for future growth or income, there is always a certain level of risk associated with an investment.
The difference between saving and investing
Saving is the act of putting money away for a future expense or emergencies. When you choose to save money, you want to have the cash available relatively quickly, perhaps to use immediately. It involves low returns with low risk. However, saving can be used for long-term goals as well.
Investing involves putting money away for the long-term creation of wealth or a future income, except you are looking to achieve a higher return in exchange for taking on more risk. Investing involves high returns with low, medium or high risk. Typically, investments include stocks, bonds, mutual funds, unit trusts, exchange traded funds and shares – to name a few. Only invest in products you have researched and understand.
How to invest
1. Get your finances in order
So that you have funds available to invest.
2. Learn the basics
Only invest in what you understand, because investments are risky, so ensure you have sufficient knowledge before investing.
3. Setting goals will keep you motivated
Have a long-term investment strategy.
4. Assess the risks
Risk is not a pleasant word but, when investing, you have to understand what you stand to gain or lose. If you are younger, you can afford to take higher risks because you will probably be able to invest long enough to recover any losses you may experience.
5. Balance your investment portfolio
Make sure your portfolio is diversified – that means that your funds are in different types of investments, companies and risks.
6. Don’t make emotional decisions
Stay disciplined, do not make decisions based on the daily fluctuations of your investment’s performance.
7. Be patient
“Past performance is not an indicator of future performance". The longer you have the investment, the greater the return is likely to be.
8. Be resilient
Investments have good days and bad days. Look for real value on investments – remember to factor in inflation.
9. Review and adjust
Keep learning and tracking your investments because knowledge is power . Understand what went well and what could have gone better before deciding on how to move forward. With your investments
10. Find an accredited financial advisor
Work with a registered financial advisor. Verify if your advisor is registered with the Financial Sector Conduct Authority at www.fsca.co.za or, call 0800 20 37 22.
11. Don’t get scammed
Avoid get-rich-quick schemes. If it sounds too good to be true, it probably is!
Investing.
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Protecting your investments
To protect your investments, and assets such as your house or art that you may have gained through our investments , consider taking out a form of insurance. Here are the different options:
Short-term insurance
Protects the value of movable and immovable items and ensures compensation should these items become damaged or stolen, e.g. cars, homes, cellphones and even travel. Short term insurance provides risk cover for your possessions for a short period of time. This type of insurance is very competitive so do your homework first. Most short-term insurance policies have an excess which you would be required to pay first if you claim.
Long-term insurance
This is a contract where the insurer promises to pay a designated beneficiary a sum of money (the ‘benefits’) in exchange for a premium upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also release payment. The policyholder typically pays a premium, either regularly or as a lump sum.
Company disability cover
This cover assists employees should they become disabled or develop a critical illness, where the employee cannot fulfil his/her duties due to a terminal illness, or a disability. There are several options to an employee, but at its basic form, the policy will pay a lump sum or monthly income towards the employee once they have been medically diagnosed.
Medical insurance
Medical insurance is not the same as medical aid. This is one way to make sure that you can afford the best care in life-threatening situations. You can insure against certain medical conditions like a heart attack, car accidents, cancer, etc. and should you suffer from one of the listed conditions, you will be paid out a lump sum to help cover any extra costs.
