Building an investment portfolio

Before you start with your investment portfolio, consider if you have:

  • Reviewed your budget.
  • Have your debt under control. In some instances, it might be better for you to pay off your debt first and then start your investment portfolio. To find out if it is viable for you to settle your debt first or start investing, download out debt vs. investment tool now.

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Once you have determined how much you can invest, you need to determine how long you want to save or invest for.
This is important for the following reasons:

  • Long term investments have more risk that is reduced over time, but tends to have higher returns.
  • Short term investments or savings tend to have lower interest rates.
  • Inflation influences the purchase price of your money. If you have long term investments in short term investment vehicles you could risk losing the purchase price of your money.

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When an investment opportunity is presented to you and you think this offer is too good to be true, consider the following?

  • Is this investment an exclusive opportunity only available to you and your family?
  • Do you get a referral payment or commission when you convince other people to invest?
  • Is this interest earned higher than what your local bank offers and your capital 100% guaranteed?
  • Does this investment make use of strange unknown currencies?

If you answered yes to any of the questions above, you should caution in proceeding with such an opportunity as you might be looking at a scam. For more information on schemes and scams you can visit www.easycomeeasygo.co.za.

You can ensure that the investment company is registered with the Financial Services Board (FSB) by visiting their website.

It is important to diversify your investments into different asset classes as every asset class have their own advantages and disadvantages. There are four primary asset classes:

Cash

Usually your investment will be placed in money market instruments.

Bonds

Bonds are issued when the government, parastatals and companies need capital in order to invest in their infrastructure. They issue bonds with a nominal interest rate that becomes payable on the coupon date which can be monthly, bi-monthly, bi-annually or annually. At a predetermined time in the future they will repay the capital to the bond holder.

Bonds are tradable investment instruments that can be bought or sold on the bond market. 

Listed property

Listed property is companies or funds that invest in commercial property like office blocks or shopping centres. The growth on a listed property is twofold; you can get a distribution from the income of the rental of such property and capital appreciation as the shares of such companies is traded on the stock exchange.

Before you start with your investment portfolio consider consulting with a CFP® professional..

For more detailed advice and information, find and contact a CFP® professional in your area.