How to find the right investment to maximise your investment goals
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Nonhlanhla Kunene | 04 November 2016
Whether it’s a vacation to some of the finest destinations our planet has to offer or that pricey gadget you’ve had your eye on for a while, you’re going to have to part with a few grand to make that dream a reality.
Your dreams, no matter how big or small, share one common factor: they require a fair amount of money and planning to be realised. A solid financial plan and the right investments could be the difference between your dreams coming true or falling through.
Like most aspects of life however, a solid financial plan requires a set of clearly defined goals, to help narrow down your investment choices and pick investments that are best suited to help you meet those financial goals.
We have a few tips and tricks – brought to you by those boffins at EasyEquities – that you can use to take the strain out of your pursuit for the ideal investment and help get you on that shopping spree in France sooner than you imagined possible.
Save, invest or both?
Start by mapping out your “dream”. Find out how much it will cost, how much you can afford to contribute towards it and then assess how long it will take for you to get there. Here your goals will determine your course of action. While it’s true that investing over the long term is likely to yield higher returns than a savings account, the reality is that you could end up with substantially less than what you put in if you’ll be needing your money soon.
So if your goal is a shopping spree in Paris, putting your money in a high-risk pure equities investment could put the trip at risk: because equities are volatile, there’s always the chance of a dip in the market over the short term. On the other hand, a surge in equities could enable you to add London and Milan to your trip – it’s all about risk and reward.
“At the moment I’m doing exactly that – saving for an overseas trip. And although I’ve put most of my money towards investments on EasyEquities, I’ve also kept a little in a savings account. It’s important to me to diversify where my money sits, to get the best results,” says Carly Barnes, Brand Manager at EasyEquities.
Consider the options
Fixed or flexible, high risk or low risk, cash or equities. When it comes to saving and investing, the options available can be mindboggling.
Depending on your timeframe, objectives and level of discipline, you need to ensure that your investment or savings vehicle is the most ideal one to help you achieve your specific goals. For example, a fixed deposit facility may be better suited to help get you on your way to France than a high-risk investment.
“You don’t want to be dipping into your Tax Free Savings Account for indulgences or any kind of short term satisfaction. This is your nest egg which is going to provide you with financial security later on in life. In my case I’ve set up a recurring investment each month to go into my EasyEquities account – ensuring that I am diligently setting the money aside and placing it somewhere where it can both grow and be a little less accessible than a bank account, but still available to me when I need it,” adds Barnes.
Let’s get real
If saving a big chunk of your spend means you’re no longer able to “live”, you’re overdoing it. If you’re no longer able to meet your monthly obligations or afford a measly Hot Wing Snack, you’ll probably find that your plan is not sustainable.
Before you start consider what you can comfortably afford to put aside. Remember, it’s more about the discipline to save – so rather invest or save a lower amount every month and defer the trip to France for a bit than put too much stress on your budget by trying to get there before you can afford it. EasyEquities CEO Charles Savage often refers to this as striking a balance between thrival and survival.
Take note of the fees
The mistake a lot of new investors tend to make in selecting investment is to prioritise a fund’s previous returns. While these are a good indicator of possible future performance, they are by no means a guarantee. The most crucial aspect to consider when choosing an investment is what it is going to cost you in the long run. Often, no matter how good the returns are, high costs can eat a sizeable chunk of your investment pie.
Fortunately, high fees are a thing of the past, almost. Technological innovations in financial services industry have made it possible for ordinary people to start investing with minimum capital at affordable fees. “With no monthly costs, zero brokerage fees, a measly 0.25% in brokerage commission and the ability to invest from as little as R5, you’d be hard pressed to find a cheaper option than EasyEquities,” comments Barnes.
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