How to make your money count in leaps for you

Even after having made an informed choice when investing, you may still wonder if you did the right thing.

The number of investment options multiply your risk of investing in the wrong type of asset for your needs and your investment goals.

To help you decide where and how to invest your money, consider the following: The primary goal of any investment is to beat inflation.

Inflation drives up the cost of all goods and services, and you need to ensure your money grows in line with, or more than inflation. This means the money you invested will still be able to buy the same goods or services many years hence, even if they’ve become more expensive over time. Next, decide into which of the four major asset classes you want to invest: cash, bonds, property and equities.

Cash includes money markets, savings accounts and fixed deposits. These are shortterm investments with very low levels of risk.

The returns are also very low and may even be negative, considering fees and inflation.

Growth on cash is in the form of interest, which is taxable. When assessing the return on cash, be cognisant of the effect of taxation. Cash can be used to park funds for a short period, while you plan the next move or wait for a specific market cycle to pass.

Bonds have various levels of risk and are good medium- and long-term investments. They include sovereign (bonds issued by a government) and corporate (issued by listed companies) bonds.

Property is a broad category of investments including listed property funds – such as property unit trusts (puts) and real estate investment trusts (reits) and residential investment property. Residential and investment property would typically not be included in unit trusts, but would be a part of the inventor’s other assets.

Equities or direct shares in listed companies, are often seen as riskier than the other asset classes, but that’s only the case if the funds are invested for short periods. Over six years or longer, equities have historically returned superior returns, despite greater volatility over the short term.

Your decision on where to invest your funds should be guided by your financial goals and investment time frame. If you have aggressive growth goals, you’ll need an increased tolerance for risk. However, you may want to preserve your capital and have it easily accessible, which may reduce your growth potential.

Your investment goals may be the single most important factor affecting how much risk you need to take, which in turn affects which asset classes you invest in.

With this in mind, it’s of the utmost importance to make this decision supported with the right advice.

Martin de Kock is with Ascor Independent Wealth Managers