How to choose investment plan
USE INFORMATION WISELY
BE VERY focused when deciding your investment plan.
With the number of investment trusts in the country exceeding 2 000, the number of shares on the JSE exceeding 400 and the multitude of unregistered investments being even bigger, how do you take advantage of the information age to benefit you?
This is a question that many people find themselves faced with but have no answer for.
As professional investors, advising people on stockbroking, investing and retirement we are faced with the same challenge, and it’s even harder for us because we have to take into account your investment wishes and very personal goals that are important to your family.
So how do you avoid information overload?
It is important to define your goals. Knowing why you are investing allows you to select the options that makes sense to you based on your needs.
If you invest with the aim of buying a house, the only information you should worry about would include safe long-term investments, ability to access your investment when you want to buy the house, and access to current and future interest rate possibilities.
When investing for retirement, two sets of information are important.
Firstly, your personal circumstances, your dependents, how much you have saved for retirement at work via a pension fund, or privately via a retirement annuity, your age, your health and when you plan to retire.
The second set of information you need to focus on is the available solutions to you, and to match them with the answers you get from the first set of questions you may have, as detailed above.
Why are you retiring, when are you retiring, which option is suitable for you, what are the implications of choosing a living annuity over a life annuity?
For the rich and/or risk-loving investors seeking higher returns, the key information you need to make a decision is very different to the above two examples. For example, an investor who prefers higher risk, must invest in shares, and perhaps exchange traded funds.
They may also need gearing, which allows them to invest R100 000 and benefit from the same buying power as someone with R1million. This is called leverage, and is the same thing we do when we buy properties. It is highly risky, but may deliver good returns for people with lump sums of R50 000 and the required patience.
So it is clear that different people need to focus on specific questions and information sources regarding their investment needs.
We are hosting investment seminars to help you decide on what works for you when making such investments in Durban, Johannesburg and Richards Bay on the March 11. We will give you the chance, as a reader of the paper, to get appropriate guidance on the above questions.