Investment

Once you have hired an accredited financial advisor and you are happy that the person in your employ is looking after your best interests, you will begin discussing different investment options. I will attempt to list the pros and cons of each investment kind as well as explaining how each investment works. I will obviously not be able to list every single investment in great detail and for the purposes of this site I will omit securities and bond investments and only touch on the most common and popular investments, but at least you will be more informed when discussing your investment options with your financial advisor.

Fixed Deposits: These investments are usually managed by banking institutions. Banks will give you a fixed interest rate on your deposit for a specific period of time. The pros of this kind of investment are that your money is generally safe. You are not likely to lose your investment so this is a low risk investment. In addition, most banks will offer a preferential rate depending on your age and the size of your investment. On the down side, you usually need a lump sum to invest and due to the fact that this kind of investment is low risk, the returns are often not great. In addition, you will usually not be allowed to withdraw or deposit funds into your account for the duration of the investment term.

Retirement Annuities: Although retirement annuities (RA’s) have stayed out of the news in recent years, many will still remember the negative press that surrounded RA’s in the past. This need not be a major deterrent for any new investor. RA’s are still a viable option for any beginner. RA schemes generally consist of a payment plan that a person signs up for. Funds are paid in on a monthly basis to a company and are then paid out to the investor at a predetermined date. On the up side, you may have a decent return on your investment and it is almost like a forced savings plan for those of us that lack discipline. On the down side, there are many unscrupulous people out there that may take advantage of a young investor. In addition, the monthly installments usually increase over time to allow for inflation and serious crises like retrenchment can create significant problems as your investment can be forfeited if your commitment isn’t met for a length of time.

Property: Property investments are pretty self-explanatory. You buy property, you rent it out to cover the bond and after a certain amount of time you sell the property at a profit. Due to the simplicity of this investment, it is very popular. Since you will essentially be dealing with the “economic markets” there is a risk involved. The risk is usually quite low however and the return tends to be good. Even in light of the global economic crises if you stick it out, your investment will pay off. The major deterrent is that you need significant capital. This will usually be in the form of a bond from a bank. The mortgage repayments may not always be covered by rentals and you may not be able to rent the property out as easily as you anticipated. In addition, you may be required to perform maintenance on your property and this can be expensive! So in spite of the promise of significant returns, property investment needs to be a carefully considered decision.