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Is your investment the right one for you?
by Madeleine Coetzee - Monday, 22 April 2013, 11:11 AM

By Paul Roelofse, CFP® and FPI Consumer Advocate

“There are many ways to save and invest. Many options and investment vehicles to consider. So how does one go about choosing the most appropriate one to suite your financial plan?”

Your investment should be seen as a means to an end and not just and end in itself. Your investment needs to aim towards a specific objective. The more specific it is, the more meaningful your evaluation of the performance will be.

Let’s take a look at some of the main considerations that one should use to evaluate an investment:


The possibility of your investment loosing value through fluctuations on the market is a risk to you. Especially if there are large frequent swings in the valuations. Typically, shares trading on the stock market behave in this way which makes them risky.


Synonymous with risk in the investment world, is return. It follows that the higher the risk you are prepared to take with your investments, the higher returns you should expect. Saving in a money market account is much less risky, for example, than saving in a share, therefore, you should expect a lower return from cash and a higher return from shares in relation to the risk of the investments.


The investment should also be considered in the light of how accessible and flexible it is should you need to draw down from it when you need cash. How quickly can you access your funds is an important question as there will be many events in your life where your investment will need to provide for you.


Investments are taxed in different ways. What is important is the actual return you receive after tax. You need to compare your options carefully understanding how much of your gross return will be paid over to the taxman.


All investments have elements of costs applied to them. After all no one works for nothing. Costs are generally charged by administrators, financial advisors and investment managers. You need to understand these fees very carefully too as they will make a big difference to your initial return. If you take time to evaluate your investments using these criteria, you should have a more structured way to assess which investments are more appropriate for you.


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