FINANCE WELLNESS COACH: Three principles to guide smart investment decisions
Don't panic over fees — give each rand a job: set horizons, use tax-efficient wrappers and accept only the risk needed to meet your investment goals with the money you have.
Three principles should guide smart investment decisions:
1. Consider your timeframe. When investing, balance the need to have funds available when required and the need for them to outpace inflation. Divide your investments into three buckets based on urgency of access. This allows for varying risk levels within the same portfolio.
2. Structure investments tax-efficiently. Utilize tax-free investment options for the long-term portion, such as using the annual R46,000 contribution limit. Consider endowments if your marginal tax rate exceeds 30%. While tax should not drive the decision alone, ensure funds are arranged optimally for your needs and timeline.
3. Do not get overly focused on fees. Cheaper may not always be better. Compare performance after fees, not just costs. An expensive hedge fund may produce higher returns than a cheaper tracker after accounting for expenses and volatility. Determine each rand's purpose, invest accordingly, and accept only the risk needed for your goals.
Written by urgent.news from Daily Maverick's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
