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Key things to consider before you invest

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Key things to consider before you invest

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Investing is not ‘one size fits all’. We all have unique goals and timelines to achieve these goals in. We are also not all at the same place financially. This means that a sound approach to investing should be one that is tailored to your circumstances – and aims to meet your own personal goals.

Key things to consider when you invest

Bad/high-interest debt

This is the kind of debt that charges you extremely high interest (18%+). It is wise to ensure this is taken care of quickly because the interest you’ll pay is likely to be higher than what most investments can give you in the market.

Think about paying this off first before you invest.

Your time horizon and how much risk you’re willing to take

Investments are usually viewed in terms of the following horizons: very short term (under 1 year), short term (1 to 3 years), mid-term (3-5 years) and long term (6+ years). Map your goals according to this. This will determine the investment you choose.

The longer your investment time horizon, the greater the opportunity inflation has to affect you. Think about it this way, R10 in 1998 could buy you much more than in it did in 2018. To, therefore, protect your ability to afford your lifestyle over the longer term, you should invest in assets that are expected to grow faster than inflation. These are called real assets. (E.g. shares and property)

As a general rule of thumb, the shorter your investment horizon, the less risk you should be willing to take. Conversely, the longer your term horizon the more risk you can take. This is a sweeping statement and is better explained here.


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Access to your money

Certain investments by nature can limit how quickly you can access your money. You should usually expect to get additional compensation (return) for the lack of accessibility.   

How much money do you have to invest?

The size of your investment is important as you can only access certain avenues when you have a large investment amount. You may have to save up some money in a bank account before you can access these. Examples are here.

How well diversified are your current investments?

Another important rule when investing is not to place all your eggs in one basket. That way if your one investment does not do well, your entire investment basket does not fall flat.

How tax-efficient is your investment?

Tax is vital to consider because it affects what will come into your pocket at the end of the day. This article goes into detail on this.

Is this even a real investment?

If it’s too good to be true, then it probably is… This article can help you in spotting scams/ponzi schemes

Objectivity and expertise

It is important therefore to sit down with someone can objectively view your circumstances, and is qualified to advise you appropriately.

The reason sound and independent financial advice is important is:

  • To develop a strategy that practically accounts for your unique circumstance and goal,
  • but is flexible enough to change given a change in your situation,
  • and objective enough not to irrationally change your plans due to changes in the market.


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