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Preserve your wealth

Content provided by Sanlam. See Financial Solutions for Business Owners, for tailormade financial advice.


Most entrepreneurs put all their money into their business, seeing it as an investment for the future. But what if things go wrong? Therefore, it's important that you think a bit more broadly, investing some of your earnings elsewhere. This article will give you some insight into the best places to invest your money.

The expression "putting all your eggs in one basket" is very appropriate when it comes to plowing all your earnings back into your business. It's important to invest some money elsewhere; towards your retirement, for your family's needs should something happen to your, or for something to fall back on if your business fails.

What do I look for when wanting to make an investment decision?

Investment Considerations

There are various aspects you should consider before making your investment. These are some of the factors that should be carefully thought out before making any investment decision:

What is the intention of the investment?

  • Building up a capital base
  • Wealth preservation while delivering a certain level of income
  • Savings for a specific purpose, e.g. education, holiday, a home

Have you established your constraints?

  • How much risk are you prepared to take?
  • How many years do you have to invest - your investment time horizon?

Set realistic goals and take responsibility for your needs and plans.

  • Understand the discipline that you need to achieve these

Review your plan on a regular basis.

  • This will help you to stay committed to your goals

Would you be better served using a financial advisor?

  • Is he/she a registered Financial Services Provider (FSP)?
  • Is he/she qualified to provide advice (a Certified Financial Planner - CFP)?
  • Expect a full needs analysis before making any investment recommendations
  • A service level agreement should be established up front

What is the benefit of diversification and is the balance right in my case?

Risk can be reduced by spreading investments. The spread may cover cash, equities, bonds and property. Further diversification can be achieved by investing offshore and in various markets and industries.

Is my age a factor?

Risk tolerance and choice of product can be influenced by one's age and future plans. If you are 25, debt-free and single, you can take more risk than if you are 45 with children nearing university age. Similarly, as you near retirement you may wish to adjust your portfolio, with the accent on income and capital guarantees.

Establish a regular review process?

People change; markets, too. An investor working to a long-term strategy should not arbitrarily switch investments after a few months, but a regular review is advisable. This may occur each year, but timing depends on the portfolio and individual needs.

What do I do if the market declines?

If you have a balanced portfolio and solid cash position, the answer may be 'absolutely nothing'. If the timing horizon is five years, a temporary market dip is no disaster. Lower prices may simply create value opportunities. For example, people who buy Collective Investments (unit trusts) every month acquire more units for the same outlay when prices are low.

 

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