RETIREMENT PART 5: What’s the difference between retirement products?
Nazia Khalon Official retirement products have great tax benefits but come with some restrictions. Understand your options before you commit. Making the decision to start investing for retirement is the first step. The next step is to decide on what tools to use. This means figuring out the difference between retirement products and other products on offer. The range of options to consider can leave you flattened even before you’ve made a start, but the best way to approach these options is to think about your needs and your level of self-control. Some options will give you freedom and flexibility, which may tempt you to withdraw prematurely and lose the benefits of compounding over time. Others will lock you in, but give you great tax deductions in return. Decide on what works for yo
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Tapping into your investments as an income
Whether you’re saving to pay for your children’s education, take a break from work, or even to have more spending money in retirement, setting a plan in motion so you can draw an income from your investments could make that goal a reality. What type of funds should you be looking at that will help you generate an income that’s higher than a simple bank deposit over time? “Enhanced income”-type funds are those that aim to deliver a high level of regular income that will beat a cash or money market return over two to three years. How do they do this? These funds invest in a combination of assets that give you both 1) a steady income stream, and 2) some capital growth over time. This comprises a high proportion of assets like cash and bonds for income, as well as a smaller amou
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The magic of compound interest
This is how big corporate companies, banks and wealthy people make their money: they let their money work for them by earning interest on interest. Otherwise known as 'compound interest'. The illustration below gives you an idea of how effective this is. If you were to pay yourself 1 cent today and double it each day for 31 days, what will you have at the end of the month? The sooner you start, and the longer you stay in any investment, the better the results become over the longer term. It is like a snowball. It eventually runs away with itself. So, start saving NOW and don’t stop for anything. Set yourself goals and go for it. Let's look at another scenario. If you invested R100 000 today at 10% compounded interest, how much will it be worth after 31 years?
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LIVE ON EXPRESSO: Teaching Kids About Finance
Part 1 [embed]https://youtu.be/S1ingWiH4uE[/embed] Part 2 [embed]https://youtu.be/xQJUuHhbodw[/embed] Part 3 [embed]https://youtu.be/CHLhkkZhZrM[/embed]
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Role of a Certified Financial Planner®
What is the Role of a CERTIFIED FINANCIAL PLANNER® What is the role of a CERTFIED FINANCIAL PLANNER® regarding Investments?
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The best unit trusts to suit your needs
Investment philosophy and ethics There is no one-size-fits-all option when it comes to unit trusts, as we all have different personalities and investment goals. Start by looking at the top asset managers in your country with excellent reputations. In South Africa, we recommend looking at Allan Gray, Coronation, Prudential and Investec to get you started. Then do some research on each company’s investment philosophy (how they buy and sell asset classes or shares to make you money) and see if you agree with their philosophy or not. After all, there's no point in investing in companies when you don’t believe in their ethics or investment philosophy. Age is important The younger you are, the more risk you are able to take when selecting a unit trust. The reason for thi
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Understanding Unit Trusts
Today we are going to discuss Unit Trusts and how Unit Trusts work. If you haven’t read my last 2 articles on Asset Classes and Asset Allocation, I recommend that you have a quick read through those first as they form the foundation for this post and for your best understanding of Unit Trusts. I assure you that understanding Asset Classes and Asset Allocation, will change investing for you forever. I am going to start at the very beginning and break down what Unit Trusts are. Unit trusts are when companies like Allan Gray (Asset Managers) buy Asset Classes on behalf of us in bulk and at a much lower price or a better interest rate on bonds etc. They then take the different Asset Classes and combine them into what we call Funds. For example all Asset Managers will have what we ca
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Investment Value
How do you know if the investment has any value? The value of your investment is determined by the value of the underlying assets in your investment and the asset price change or if you buy or sell off units during the period of the investment. Your investment value can change depending on the underlying assets in the investment When the price of the units you own changes, this can affect your investment in a positive or a negative way. However the scenario that you are optimistic for is for your unit trust to earn returns through capital growth, which will then effect the value of your investment in a positive way. If the underlying assets are volatile, then the price of the units can fluctuate during the investment period. The most important thing to keep in mind is as long as
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Understanding Return & Unit Price
Understanding Unit Trust Returns Maximize your capital growth in your investment Some investments focus purely on getting the best possible capital growth by investing in assets that the fund managers feel will grow over time. How they do this is by looking for assets that offer a great value for money, or that they feel they are getting at a discounted price to what they are worth. The fund managers will then hold onto these assets for some time, until the underlying assets get to a point that they are worth more than what they were purchased for and then sell them off at a profit. Maximize your possible income growth on an investment Certain investments or unit trusts main goal is to not necessarily achieve capital growth, but rather create a reliable or steady stream of income thr
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About Unit Trusts
Key Benefits of Investing into Unit Trusts Investing in a unit trust is a pretty cost-effective option When you invest into Unit Trusts, you are able to put your funds together with other investors in order to purchase units or shares in other companies. By doing this you no longer have to fork out big amounts of money to buy shares and get the same diversification. Asset Managers will also be able to pool all Investor’s funds together and negotiate better rates for shares in companies or the different asset classes. You can spread your investment risk By buying into Unit Trusts you increase your exposure to a wider range of investments at a much lower price. Not only do you get a lower price, but it also simplifies your investing opportunity into various asset
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Become an Investment Specialist Today!
Yes you can become an investment specialist today! After going through Asset Classes last week, there is just one quick thing we need to look at before we move on to investing into Unit Trusts. I touched on Asset Allocation briefly in the last post, so in this post I will go through Asset Allocation in a little more detail so that you can build a better understanding and knowledge base. Asset Allocation: Asset Allocation is how you divide your investments between the Asset Classes. So it is deciding how much cash, bonds, property and equity you want in your investment. Asset Allocation is, in my opinion, one of the most important decisions you make when it comes to investing and achieving your investment goals. Before you go ahead and select which bonds, equity etc you want
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Compound Interest
My first few blog posts will deal with the foundation of finance. Once you understand these foundations, it will make a huge change in your life and outlook on money. One of my favourite things in the world is called compound interest, yes I know I am a nerd, but it really gets my blood boiling, as it is a huge phenomenon. I think I am not the only one who shares this fascination on compound interest. Albert Einsten once said: Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it. My goal in this article is to get us all very comfortable around compound interest and its capability of changing your life. I think the best way I can illustrate this without going into too much financial jargon is to create a picture
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Introduction to Investing
What is investing all about? With this post let’s go right back to the very beginning of the ABC, DOE RAY ME of investing and let’s chat about what Investing is all about. When we invest money, what our main objective is, is to buy something that you believe will give you a bigger return than if you had to keep your hard earned money in your bank account or in many cases under your pillow. Let’s look at Investment return and the possible risk linked to that. When we talk about investment return what we’re talking about is the possible profit that you can make in buying something at a certain price and then hopefully selling it later at a higher price. The profit that you earn on the investment is known as the return on the investment. Have you ever heard of the phrase, h
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Investment Return
How Do Investments Earn Return / Profit? When you start to invest, the money that you will invest is called capital. On the other hand the objects that you own, like a house, shares and Unit Trusts are what we call assets. So the money that you have is capital and the objects that you own are assets. If the price of your assets increase over the period that you own them, your capital that you have invested into the assets will then also increase. You could also get certain assets, (that I call bounce assets) that not only grow in value, but also produce an income stream during the growth phase. The income stream could be means of interest payments or dividend payments if the companies perform well over a particular period. If you combine the capital growth and the income that you
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Understanding the Balance Between Risk and Return
Understanding the Balancing Between Risk and Return Video Player Certain asset classes have the potential to deliver a great return/profit over a number of years; however the same asset classes also have the potential volatile returns over the short term, depending on how the asset classes respond to what is going on in the economy at any given time. So the high risk asset classes like equity’s are investments that you would ideally like to invest in over a longer period of time. On the other hand you can also get certain asset classes that are less risky, but the no risk no reward phrase comes into the equation on these asset classes, as the returns are much lower. A typical asset class that will fall into this bracket would be cash/money market.
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Investment Risk
What is the risk of losing your hard-earned money? Well in life there are no true guarantees, so when you enter into any form of investment you need to understand that you can do your best to calculate the risk and to make the best informed decision in entering into the investment or not. But at the end of the day there are certain uncertainties that can arise and change the picture completely. This is why, in my opinion; you want to have the experts in control of the situation, if it ever does arise. So when you enter into an investment you have to come to terms with the fact that there is a certain amount of risk involved, and each investment will have a different level of risk attached to it. However keep in mind the old phrase that if it sounds too good to be true, it most prob
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