Guiding consumers since 2009

Want to go to Brazil in 2014? Make the right investments now

By Staff Writer
As the 2010 FIFA World Cup euphoria lingers, many new-found soccer fans are eagerly planning to attend the next World Cup in Brazil in 2014. In the current market, saving for an endeavour like this is in a relatively short space of time is an ambitious financial goal. However, by making smart investments that are appropriate to your time horizon, this goal is achievable.

According to Anil Jugmohan, Investment Analyst at Nedgroup Investments, most people don't realise how much they need to save in order to meet their future objectives - and this usually ends up in them not having saved enough. "It is important to understand your financial objectives, the time horizon that you have and, importantly, the investment products that you should use in order to achieve them."

Jugmohan advises that different products are meant for different objectives. "For example, a low equity fund (less than 50% equities) is probably the best product solution if your goal is to save money for a trip to the 2014 FIFA World Cup." According to Jugmohan, this fund should be well diversified with a high level of offshore exposure to provide protection against the weakening of the rand.

"If, however you are saving for retirement which has a much longer time horizon, you can probably invest in a high equity fund that is sufficiently diversified with a suitable level of offshore investments," he says.

A bank account should be used to efficiently manage everyday transactions i.e. weekly grocery shopping, or monthly debit orders. "Bank accounts do not pay high interest rates as banks instead help to subsidise your fees. As a result, you will almost certainly achieve better returns elsewhere if you are investing for longer term goals."

In all cases, you need to choose products that have suitably low costs, minimise your tax liability, have sufficiently high expected returns, and minimal risk of capital losses over the appropriate time frame. "Nothing is certain when it comes to investing and the best you can do is to define your time horizon and ensure that this matches with the amount of risk you are taking," says Jugmohan.

He advises that an investment strategy for any time horizon should start with drawing up a comprehensive monthly budget outlining all current income and expenses. "It is important to be completely honest with your spending habits when listing your expenses."

"Following this, group related items together, such as car, home and medical insurances and from there you will be able to assess where your largest expense areas lie, both on a broad level and individually. The ideal scenario is that your net, after-tax income exceeds your expenditure each month. Of course, the greater the degree to which your income exceeds expenses, the better. If this isn't the case, all is not lost. Just start working on a viable plan to maximise your income and minimise your expenses."

The next step is to carefully prioritise current expenses as well as things you would like to save for - such as a holiday in Brazil in four years time. Being able to prioritise these objectives, and strike a balance between current expenditure and saving for the future is the key to success. Based on this, choose investment products that have the appropriate profiles for your goals.

"Unfortunately, investing is a slow process so you will have to be very patient in order to reap the large long term rewards. Historically, investments that have provided the best returns have delivered spectacular shorter term capital losses. To alleviate these sorts of risks it is recommended that you speak to a qualified financial advisor who can tailor a personalised strategy to meet your needs," says Jugmohan.

Recent Articles

Featured The bank took money from my account – is this allowed?

You’ve just deposited money into your account and suddenly you see a notification from your bank. Money has been deducted from your account to pay the outstanding debt that you have with the bank. Is this allowed?

How much does it cost to draft a will?

Having a Will allows you to determine who inherits your property when you die. If you die intestate, the government will determine how to distribute your assets. Many people die intestate because they don’t know how to draft a will or are intimidated by the costs of drafting one.

Is your home correctly priced for the current market?

The property market is typically in either one of two phases, a buyers’ market or a sellers’ market. According to real estate experts, we are currently in a buyer’s market. For this reason, it is important as a seller to correctly price your house to ensure interested buyers and a valuable sale in the end.

Fuel rewards programme – how to fill up on petrol and points

South Africa’s volatile economy has often meant that factors like the fuel price bear the brunt. This year alone the country’s fuel price has fluctuated by between R1.50 to almost R3, which has put increasing pressure on motorists. That said, many of the bigger South African brands have provided some relief by way of fuel rewards programmes.

Deals

Mowana Voucher Special

Price: From R1,099
When: Before 24 December 2019
Where: Johannesburg

Birchwood Hotel Christmas Gift

Price: R959
When: Between 15 December 2019 to 1 January 2020
Where: Johannesburg

Burger & Lobster Lunch in 30 Minutes Special

Price: R99
When: Mondays
Where: Cape Town