Investments

There are a few factors that need to be considered when you decide to start investing. According to the book "Rich Dad, Poor Dad" by Robert Kiyosaki, the main thing that you need to realise that the only way you can ever become financially free is to make your money work for you. And it needs to work hard! Finding the best way to make this happen is different for everyone but the following five pointers should stand you in good stead when considering your options.

1: How much money do you have to spend? This is the first thing that would jump into anyone’s mind. You need to decide how much money you can afford to and are willing to invest. In addition, you need to consider whether your investment will be a once-off payment or whether you will need to make recurring payments. The options available to you are your obvious choices of mutual funds and bonds which will usually be once-off investments or you can invest funds whenever they are available but you have no commitment after your initial investment. The other option is investing in a money market or retirement annuity which will require a monthly installment. Consider your options carefully and keep in mind that you need to have some disposable income available to you in the event of a “rainy day”.

2: What is the real return on your investment? You will need to factor in taxes, interest rate fluctuations, the expected return percentile, whether the return can be reinvested automatically to earn compound returns. These are all things that your financial advisor will be able to advise you on. Ask these questions! Don’t be shy. It is your money after all.

3: Risk. You need to evaluate the risk involved. Common sense will tell you that the higher the risk, the higher the projected return will be. Do not gamble with money you can’t afford to lose. If your investment is your nest egg and you will be ruined in the event of losing it. Consider slightly lower risk profile investments. Weigh up all the different factors that may result in you losing your investment and choose wisely.

4: Are your funds liquid? Needing money in the event of an emergency and not being able to access the returns on your investment could probably be the worst thing that could happen to anyone. Ensure that the return on your investment is readily accessible without exorbitant penalties for early withdrawal.

5: Do your investments require maintenance? People often have a romantic view that they will invest money and live without worries for the rest of their lives. This can be the case, but unless you invest carefully and wisely, this will not be the case. Consider whether your investment will require any of your time, additional money, effort or any other kind of maintenance. Property investment can be a huge return but keep in mind that you will be responsible for fixing whatever breaks in the apartment/house/townhouse you decided to invest in. Imagine a geyser exploding over the Christmas season. Will you be able to manage that effectively?