10 Secrets to successful investing
Looking to start investing, but not sure where to begin? Have no-one to turn to for advice except your parents or the man at the bank? We’ve put put together the 10 top secrets to successful investing, to help you make your money grow.
1. Build up a balanced portfolio
Don’t put all your money in one type of asset class. The key is to diversify, so invest in property, shares, annuities, cash and even commodities. That is the best way to ‘de-risk’ yourself. Make sure you leave some cash for a rainy day – the last thing you want to do is liquidate a portfolio at a bad time just because you need the money.
2. Pay off your short term debt
Remember you could be paying a credit provider up to 60% on a short term loan (under 12 months), 22% on a credit card and 30% on a personal loan. If you pay these off it will enable you to free up some cash to invest for yourself and your family. Take a look at our Debt Guide for some simple solutions to managing your debt effectively.
3. Use your tax breaks effectively
It’s never too late to save for retirement. There are plenty of advantages too – you get a tax break on investing up to 18% of your annual salary in a pension fund and 15% in a retirement annuity. In the tax year ending in 2013, this will be increased to 22% and up to a maximum of R200 000 per annum.
4. Know what you are being charged
Financial advisors can charge fees for their services. So if you do seek financial advice from them, know what it is you are being charged to assure you that the expense is worth the return.
5. Know how much risk you want to take on
This is very important when investing in funds and unit trusts. If you are risk averse then put your money into money market annuities or a bond annuity. If you put it into the stock market, your funds could go down as well as up. While you don’t want to lose your hard earned cash, remember that the less risk you take on the less you will get in returns.
6. Don’t overstretch yourself, particularly on property
Make sure you can easily afford your repayments on a new property. Interest rates are at a 37 year low, and although they don’t look like they’ll be going up anytime soon, they will at some point.
7. Pay off your bond
You get no tax breaks on paying the bond on your personal residence. These repayments are therefore from your ‘after tax income’. Try and pay your bond off as quickly as you can.
8. Once you have paid it off, leave the bond account open
If you do this, you will be able to access your bond account in the future. This means that if you need to borrow, this cheap source of finance is available to you.
9. Be disciplined
Set up debit orders to run off your account every month to go into your retirement and savings account – and learn to live on the rest. If you have cash building up then you can always make lump sum payments. If you need to get our finances in order, read our guide on sorting out your finances.
10. Don’t rely on anyone else
At the end of the day it is just you in charge of your investments. Don’t rely on an inheritance, or your children to look after you in your old age. Make sure you have a financial plan and stick to it.
To keep up to date with the latest investing and moneysaving tips, as well as great sales and deals, subscribe to our weekly newsletter here.