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16 Investment tips for 2016

Duggan Matthews, an investment professional from Marriott Asset Management, shares 16 investment tips to consider while you build the future you want:   Invest for income and let the capital take care of itself. The value of a business is based on the income or earnings it can generate. Only through increasing its income can the value of a business increase, a maxim well known by those running their own businesses. Over the long term, this principle holds true for investments.   Don’t speculate with your life savings. Speculating invariably involves buying and selling investments based on very little fundamental knowledge and typically produces enormous anxiety and poor results in practice.   Start saving early. The earlier you start saving for retireme

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Preservation Funds

What is a preservation fund? If you have been investing into a Pension or Provident fund through an employer, and have to leave the fund due to whatever reason, and you move to a new employer that doesn’t offer a pension or provident fund for you to transfer your funds to, you will have to then transfer the funds to a Preservation Fund. A Preservation Fund does exactly what the wording says it does, it allows you to preserve and grow your investment until you reach retirement age, without losing the huge tax benefit that you gained through the pension or provident fund. The great thing about the preservation fund is that the return on the investment is also not taxed. How do you Invest in preservation funds The only way you will have access to a preservation fund is by

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Retirement Annuity

What is a retirement annuity? A retirement annuity, or an RA, is the most tax-efficient way to save for your retirement. Certain tax deductions are allowed on your contributions towards an RA. This could mean that your salary is taxed at a lower rate or SARS pays you some money at the end of the year. The other advantage of an RA - that no other investment product can beat - is that the returns on the RA are also not taxed.   How do you invest in retirement annuities? There are two ways that you can invest into an RA. One is by means of a lump sum contribution. The second option is by setting up a monthly debit order. You can also transfer existing RA fund benefits to another RA, if your fund rules allow it. However, this is a bit more complicated and

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Introduction to Investment Products

So what is an investment product? We have chatted in depth about unit trusts, so I am hoping that by now you are more confident in your understanding of them. So let’s start chatting about the different investment vehicles or investment products that you can use to buy into different unit trusts. Every investment vehicle or product has been designed for a very specific purpose or goal. The underlying unit trust will be the same, but will be governed differently according to the investment product rules.   What do the product rules define? The rules of each investment product will determine how that specific investment vehicle is allowed to operate. For example, the rules can determine the contributions that you’re allowed to make to the investment product. Another on the

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Endowments

If you have an income tax rate that is higher than 30%, an endowment fund could work out to be beneficial for you as there are tax benefits within the endowment if your tax rate is higher than 30%. The other area that an endowment will help is in estate planning, as you can nominate beneficiaries to an endowment and in the event of your death the funds will be paid out to the beneficiary straight away, without it being caught up in the wounding up of the estate. The value of the endowment will still be included in your estate for the calculation of estate duty, but the endowment policy allows your estate to save on executor’s fees. How is your investment taxed? With regards to any investment return, both the interest and capital growth would be included in your taxable income an

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Best Investment Option for You

What is the best investment option for you? The first thing that you need to establish from the beginning is what your investment objective is, once you have established that, you can go through a process of elimination to determine what the best Investment product or Investment Vehicle will be for you to achieve your investment objective. Once you have determined what vehicle you will be using, you can then determine what sort of risk tolerance you are willing to take off with the underlying unit trust. The longer your investment time horizon (interment period), the higher the amount of risk you can afford to take. How do you choose the right products that meet your needs? In some cases you might have more than one product that might meet your needs, so you will then look into wha

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Living Annuity

What is a living annuity? A living annuity is an investment product that you will use to invest your retirement savings in order to generate and draw a stable income after you retire. How do you invest in living annuities Once you retire, you have to take at least two thirds (you can take the full amount, you just cant take less) of your Retirement Annuity and invest that into a Living Annuity Investment Vehicle. The other options is to transfer funds from an existing Living Annuity to another Living Annuity, however this is a more complicated situation and is admin intensive. With a Living Annuity, you can control your investment, by selecting your own underlying Unit Trust and how much you want to draw from the fund on a monthly basis, as long as they meet the limits set

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Change the Way You Invest by Understanding Asset Classes.

If you have an understanding of the different asset classes, it will help to change the way that you invest! Now that we have had an in-depth look at what the stock market is all about, we can move onto Unit Trusts as the next topic or investment vehicle (investment option). Before I do this we need to rewind one step quickly and talk about something that is called ASSET CLASSES. The reason, for this, is because without this foundation information, we will not understand how most investment options are structured. I encourage you to come to grips with the term ASSET CLASSES and ASSET ALLOCATION, as this will play a major role in setting up a successful investment portfolio for yourself. Before we can really go in depth for selecting the right funds for your portfolio, we need to underst

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Effects of Inflation

Today we will move onto the effects of inflation. In my opinion this is once again another important aspect that one needs to be aware of and pay a huge amount of attention to. I like to call inflation the cancer of economics, as it is continually eating away at the value of our daily expenses and making things way more expensive for us. The main reason for all of my articles is not to scare you or paint a negative picture for you, but rather to educate you so that you are not one of the 71% of South Africans that can’t retire well! (I have linked this to the website of a really good interview if you would like to watch it).  Ronald Regan (former US President) once said: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man”. Milton

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