appeared in March issue 2021
By John Stokes & Stocor Brokers FSP reg # 17301 | 084 673 2661
As promised in the previous article we will handle investments and investment vehicles in this month’s article.
What is an Investment?
Investments are a way of saving that ranges from savings accounts with a bank to investing on the stock exchange. There are various short- to long-term options, as well as choices of risk levels in various funds.
An investment has a specific goal which could be one or more of the following: long- term wealth creation, emergency funds, retirement provision, income generation, or short-term “parking” of money.
Examples of investments: Savings accounts, unit trusts, property, shares on the JSE, crypto money, art, jewelry, classic motor vehicles, and furniture, etc.
Where to invest
There are suggested basic principles to consider before you decide to invest. Know what your profile looks like, in other words:
Why do I want to invest?
How much can I invest?
What level of risk and I comfortable with? (Low to high risk)
What losses can I handle over a short period? (Can I afford to wait for my losses to recover)
How long do I want to invest?
When you know your investment and risk profile you will be comfortable during economic downswings.
Investment vehicles must be selected to suit your investment profile.
When investing for a short period, be cautious of the level of risk you take, you may not be able to recover your losses. More risks can be taken when investing over a longer period.
Fixed- or saving accounts are very low risk with low returns. You know the interest rate and what you will receive at maturity.
Property: low to medium risk. May have a high return over longer periods. When you want to sell while the economy is in a downswing you may not receive your expected price. Consider hidden costs such as maintenance and Capital Gains Tax, it may impact your profit.
Jewelry and Art: This is a long-term investment for the patient investor. Possible high yield.
Unit Trusts: This is an affordable investment for most people. It fits any investor profile. Low to high risk and short to long term.
Investing through the JSE or insurance companies in listed companies is more secure and allows you the option to choose your own risk.
Consider the tax implications on your investment.
Income from Investments
One of the reasons for investing is to receive an income.
Income can be derived from Retirement annuities or other income-generating investments. Retirement Income Annuities are mostly bought with two-thirds of the pension an employee receives upon retirement, also with the two-thirds of a normal Retirement Annuity.
The current legislation provides for an income from Retirement Annuities of between 2,5% and 17.5%
We advise not to exceed 4% to 6 % of this investment. You will then be able to receive a 5% increase every year and your capital should not run dry and leave you with only a SASSA pension at your old age.
Income from other investments is sometimes fixed at a percentage linked with the interest rate.
Proper investment planning is important in any financial or retirement plan with many options to choose from.
Disclaimer: This information is not advice and the use of this information is at your own risk. It is merely educational guidelines for those wishing to explore the subject further, then find a registered FSP company to formally advise options.
Please send any questions or suggestions for topics to be discussed to: firstname.lastname@example.org