Investments can be very intimidating, and while this may hold you back, the good news is that you can start investing at any time, especially with the advice of an investment advisor.
However, the unfortunate reality is that too many people rush into get-rich-quick schemes offered by crooked advisors, not realising that investing is a process that takes time to deliver results. It’s not surprising then that according to the Global Consumer Survey about 70% of South Africans — compared to about 66% in the rest of the world — do not know whom they can trust when it comes to financial advice.
There is a general perception among local investors that financial products sold to them in the past have failed to live up to promises made and investment costs were higher than anticipated.
On the other hand, research has also shown that investors who work with financial advisors / planners are more disciplined and earn better returns on their investments. So, if you are ready to invest and require the support of a credible advisor who will be able to structure a portfolio to match your investment goals, you can follow these tips to make sure you make the right investment decisions and stay clear of potential investment scams.
- No advisor can predict the market and anyone promising a secret formula that consistently beats the market is unlikely to be completely truthful.
- Should the investment on offer come with guaranteed and consistent returns regardless of market conditions, it could potentially signal a Ponzi scheme. Consistent returns usually only come from money-market type investments, or fixed-yield investments like the Ecsponent preference shares, where the returns are similar to current interest rates. Read more about how to spot a dodgy investment scheme.
- Not only are all classes of preference shares governed by the JSE and the FSB, but they are also the product of a company operating under the watchful eye of other regulators, shareholder and the general public. You should also ask what the net return is on your investment and then compare apples with apples.
- Fees can ruin your investment returns and must be discussed frankly with your advisor. Ask about the advisor’s fees, and also charges by the “investment platform,” and performance fee – charged if a fund beats its benchmark. Read more about the effect of fees and pending changes that will standardise investment fees in South Africa.
- Remember that once you have invested, it is important to get an investment statement not only from your advisor but also directly from the product provider on their letterhead, stating your name and account number.
- Lastly, when looking for a reputable advisor, make sure they are listed with the Financial Services Board (FSB).
Investing should be simple and if you have the right partner to guide and advise you, it will not only be simple but also reach the investment goals that meet your individual needs. Contact our team of advisors if you need information or advice to make the most of your investments.