Top Tips for Monthly Investment Planning in South Africa

When it comes to investment planning, you want to make the most informed decisions possible. We round up insights and tips to guide you through the process.

Where is the best place to invest your money on a monthly basis? As a savvy investor, you have lots of choices, from cryptocurrency to real estate to private equity. Some of these options are better than others, depending on your investment goals, your tolerance for risk, and whether you’re looking for short-term or long-term returns. We round up a few insights and tips to help you with your investment planning.

Popular investment types in South Africa

What types of investments are popular in South Africa today? There is a wide range of potential investments to choose from, depending on your own personal investment goals.

Private equity

South African investment in private equity has soared over the past few decades. Private equity investing involves making investments in privately held companies not listed on a public stock exchange. It can also involve taking majority stakes in public companies with the goal of taking them private.

The three most popular types of private equity investing are venture capital, leveraged buyout (LBO), and growth equity. Of these, growth equities are the most popular among individual investors. A good private equity firm, such as IFSA, can help steer you towards the highest-return equity investments.

Stocks

Investing in public companies via the Johannesburg Stock Exchange is the mirror image of private equity investments. There are two primary types of stock, preferred and common. Preferred stocks pay regular dividends and provide more regular income than common stocks. Stocks can be purchased via licensed stockbrokers or via online trading exchanges, such as EasyEquities.

Cryptocurrency

Cryptocurrency, such as Bitcoin, has caught the fancy of investors of late. It is a very risky investment, however, as the price fluctuates wildly and there are no safeguards for investors. Cryptocurrency provides no regular source of income, with gains realised only when holdings are sold. It has the potential for big gains – and equally big losses.

Real estate

Real estate has long been a popular investment vehicle for both large and small investors. You can invest in individual properties or Real Estate Investment Trusts (REITs). The latter are funds that invest in properties or groups of properties on behalf of groups of individual investors. Equity REITs invest in rental properties and generate regular rental income, while Mortgage REITs sell mortgages and home loans.

Bonds

Government, corporate, and agency bonds all provide regular monthly income for investors. All bonds earn a fixed rate of return, stated at purchase. Short-term bonds typically mature in five years or less. Long-term bonds have terms from 12 to 30 years and pay a longer interest rate.

Fixed deposits

Another form of investment is fixed deposits, such as those offered by banks. While interest on fixed deposits is earned and can be drawn every month, the return on investment is typically considerably lower than with other forms of investment.

Six tips for better monthly investment planning

When it comes to monthly investment planning, you want to make the most informed decisions possible.

1. Decide on short- or long-term goals

How soon you want a return on your investment determines how you should invest. For example:

  • Short-term goals, such as saving for a holiday or new car, suggest fixed-income investments that have a more defined return and lower risk.
  • Long-term goals, such as building a university or retirement fund, suggest equity investments with a higher potential return.

2. Determine how much risk is acceptable

How much risk are you willing to assume? Your appetite for risk will also help determine the types of investments you’re comfortable making.

If you can accept a higher level of risk, you can invest in properties that have a higher potential return. If you can’t afford or don’t want to assume as much risk, you should choose safer investments that have a lower, but more likely return.

3. Choose between income and growth

Another decision to make is between income and growth investments, or a blend of the two. The difference between the two is as follows:

  • Growth assets, typically private equity, seek to grow the original investment as much as possible.
  • Income assets, such as stock dividends and bonds, provide a lower but more predictable return.

4. Follow the latest investment trends

It’s important to keep on top of the latest investment trends and not let the market get ahead of you. The South African GDP increased 4.9% in 2021, led by higher demand for motor vehicles, machinery and equipment, and base metals. Mining, agriculture, and manufacturing were the top-performing industries, making them strong investment opportunities. Other strong sectors for investment include healthcare, financial technology, and infrastructure.

5. Do your research

Never invest blindly. You should always research any potential investments you’re considering. You need to understand the risks and rewards of a given investment opportunity so that you can make an informed decision. Do your research so you know the real potential of any given investment.

6. Use a financial advisor

The best way to make informed investment decisions is to employ the services of an experienced financial advisor. A qualified financial advisor has the data and experience you need to make smarter investments and maximise the return on those investments. They’ll help you find the right investment opportunities to meet your investment goals.

Let IFSA help you with your investment planning

Making the right private equity investments requires data and planning. Fortunately, you don’t have to do it all yourself. At IFSA, we do the homework for you – we vet and handpick low-risk and low-volatility opportunities that represent the highest possible returns for your investment. Our goal is to help you reduce risk while maximising ROI.

Contact us today for a free one-on-one consultation with an IFSA financial advisor.

IFSA (Pty) Ltd Registration No. 2000/005153/07 An Authorised Financial Services Provider Licence No. 43337

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