Things you need to know before investing

Before putting your hard-earned money into any kind of investment, it is important to understand the risks of each, including any legal implications.

Investing is a way to passively put your money to work, potentially building wealth.

Investing your money smartly allows your money to outpace inflation and increase in value, creating a safety net for yourself or your family in the future.

From simply growing your money to saving for retirement, effective investing allows you reach your financial goals.

But where should one invest? What should one know before putting one’s money at risk? And are there legal risks when it comes to investing?

We approached Devin Shutte of financial service provider company The Robert Group, based in Umhlali, to shed some light.

“The world of investing can be overwhelming. There’s a huge number of choices in terms of where to invest, but this can be daunting and one needs to find the correct advisor to help navigate the ups and downs,” said Shutte, head of investments.

With investing possibly becoming incredibly stressful owing to the risks, Shutte said when it comes to stable investments with high returns, it’s all about managing the risk and return dynamic.

Financial markets are often unpredictable, so diversification is the name of the game. This means allocating assets across the board to allow for smooth returns – not focusing on any single investment.

Shutte advised finding a balance between acceptable risk with the best possible potential for healthy returns.

“Rich diversification, coupled with quality underlying investments and a long-term approach – time is investments’ best friend – are the key ingredients to success.

“When looking to invest, one’s primary concern should be whether your capital will grow by at least the inflation rate. If this is not the case, you’re losing money.”

Aside of knowing the proverbial where, why and how of investing, there’s also the legal aspect of it all – tax.

As Shutte explains, investing is further complicated by various product and tax legislation.

“An unskilful investor could fall foul of this without being aware. Conversely, there are certain regulatory provisions that can benefit an investor and should be considered as part of an overall financial plan.

“An experienced advisor will guide you through appropriate and tax-efficient structures.”

Investment income must, of course, be reported annually.

This is done with an ITR12, which in itself can be tricky. If you are a South African tax resident earning in this manner, you are required to report your worldwide income, which includes global capital gains.

Some investments qualify for rebates and exemptions, and in some cases, foreign tax credits can be claimed, preventing a person from being taxed twice on the same income.

Speak to a professional before putting your hard-earned Rands to work for you.

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