If you are a young South African who is keen to develop a bright financial future for yourself, you will need to consider investing your money into a vehicle that offers reasonable rates of interest. But not many South Africans know enough about making investments, and as a result, their financial well-being is jeopardised.
The first step on the road to achieving sound financial health is becoming financially literate. It is not particularly difficult to do and an excellent place to start is by reading articles about financial literacy and why learning the basic steps of personal money management is so important.
Put simply; an investment is something that you buy today that will grow in value or that will secure you a better return at some time in the future. It will, of course, cost you some money initially, but a successful investment will be worth more later in monetary terms that it was when you purchased it.
Investments can come in many forms, such as real estate, funds for your retirement, unit trusts, etc. Whatever it is you invest in, it should be something that that will generate a profit over time.
As your investment grows, and depending on the nature of that investment, you can use its growth to provide you with an additional monthly source of income, or a cash lump sum when you come to encash it.
One thing you should think about if you are planning to invest; is currency. As a South African, you will naturally be thinking of keeping your money in Rands. But that may not necessarily be the best thing to do – leastwise, not with all of your money.
The South African Rand has gone through turbulent times of late. In the second quarter of this year, it lost 14% of its value. But since the beginning of July, it has begun to rally and has lifted by 3.4%.
But currencies will always be subject to a certain amount of volatility so investing off-shore can be an attractive thing to do, so, with at least some of your money. All South Africans are allowed to take R1-million out of the country every 12-months.
Another method of investing off-shore is to put your money into a South African company that has an off-shore facility, but that provides you with a Rand in and Rand out facility. This is something that some life insurance companies and unit trust management companies offer. They can invest up to 40% of your money abroad, but when they pay you out, they bring your money back in and pay you in Rand.
Another way of investing off-shore is to put your money into a firm of stockbrokers who have various off-shore capabilities.
For serious South African investors, having some form of off-shore investment is a vital part of proper wealth management.
The majority of professional wealth managers are in agreement that biasing investments more toward off-shore than local makes good sense. That’s why if you do have a retirement fund or unit trust portfolio, you are likely to see a more substantial portion invested overseas than in South Africa itself.
For most young South Africans, this sort of investing is out of reach, although its something that should be entered into at the earliest opportunity, especially for if your investment is geared towards your retirement. But before you can go down this road, you first need to become financially literate.