Strategies for your 13th cheque | November 2013 Where to invest your bonus Nico-Louis Minnie: Liberty Investments Whether your bonus is R1000 or R1 million, the same basic rules apply Pay off debt If you are paying off a credit card at 20% a year, there is no better investment than settling that debt. The key is to use this opportunity to settle short-term debt and then cut up the cards. There is no point in using this windfall to improve your finances only to be back in the same situation the following year. Build an emergency fund: An emergency fund is the best way to keep you out of debt. Rather than relying on your credit card to bail you out in an emergency aim to start off with a R10 000 emergency fund and build it up until you have three months of household expenses saved. Invest for the future There are many investment vehicles available to choose from. Depending on your unique tax and other circumstances any option you choose may have to be tailored, so consult a financial adviser to walk you through all the options if you are unsure. An easy way to invest any amount between R1, 000 and R1, 000,000 is via a linked investment service provider (LISP in short). A LISP gives you the ability to invest in a wide range of investment portfolios via a single point of entry. It is like going to a supermarket instead of a bakery thus saving you time and money. This means that you can invest in portfolios managed by STANLIB, Liberty, Investec, Coronation, etc. with a single debit order and you will get a consolidated statement showing you the value of your total investment. You can invest on a monthly basis, ad hoc when you have spare cash or even once off with a lump sum. The added flexibility is that you can withdraw funds at any stage. Liberty recently launched a LISP called Gateway. The investment fees on GateWay are extremely competitive and for a limited time qualifying investors will pay no Gateway fees when investing. Don’t wait for the “perfect” opportunity It is important to start with something, even a small investment, and not to delay this for months or even years whilst you are looking for that perfect opportunity. The cost of delay is simply too high. Delaying a 10 year investment by only 5 years requires you to invest 60% more to get to the same amount* – That is, you have to invest R1,600 instead of R1000 to get to the same amount. Get advice It is always best to consult with a registered financial adviser. You wouldn’t service an aero plane yourself before take-off so why attempt financial planning without the proper training? *Based on a 10 year single premium investment with an annual investment return of 10%.
Posted on: Wed, 20 Nov 2013 05:21:56 +0000
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