We take a look at compound interest, reducing costs, and getting more from your investment
Exciting market news
The rand strengthened for a fourth week against the dollar and data showed the continent’s biggest economy may avoid a recession this year. The rand was also set for a fourth weekly advance against Britain’s pound and the currency is heading for its fourth weekly gain against the euro. This is great news for consumers and could potentially also lead to additional decreases in fuel prices.
More and more international investors seeing investment opportunities in South Africa and this begs the question- why are more South Africans not doing the same? For this reason, it is critical that clients need to speak to an accredited financial advisor and make sure they receive the right type of advice.
Financial shares rebounded strongly on the JSE on Friday and by mid-morning the All-share index was already 1.23% higher at 52 966 points, while the Top 40 index traded 1.44% stronger at 45 865 points.
International market news
South Africa has once again regained the title as the biggest economy in Africa, surpassing Nigeria. South Africa’s Gross Domestic Product is worth $301 billion against Nigeria’s $296 billion.
In Britain new inflation rates are also being announced and these will be the first real figures showing the impact Brexit had. If the data proves worse than expected, international investors may return to South Africa and other countries, looking for investment.
Taking a look at investments and how to save, how can investors capitalize on their investments when saving for retirement?
Albert Einstein said: “Compound interest is the eighth wonder of the world”. This is a concept that can add great value to an investor’s portfolio and the only way to take advantage of this is to start saving early.
We often refer to costs and how this can influence your net effect at the time of retirement. A quote from the National Treasury’s July 2013 paper: ‘Charges in South African Retirement Funds’ explains this: “A regular saver who reduces the charges in his retirement account from 2.5% of assets each year to 0.5% of assets would receive a benefit 60% greater at retirement after 40 years.”
In practice this means that if your annual administration or management fees are 2% lower you can retire with 60% more in benefits than you would have, had you been paying the higher fee. Instead of R1 million, you retire with R1.6 million.
A 2% reduction might be ambitious for most people, but cutting out just 1% can make the difference of retiring with 25% more in savings.
Its women’s month- women need to save even more and invest
Statistics show that women generally live four years longer than men, and in addition to this, women are also forced to retire earlier than men, at the age of 60. Adding these years together, there will be an additional nine years of costs to consider and to plan for. Women thus need to start saving earlier in life, and also need to consider their financial strategy more carefully.
Speak to an accredited financial advisor, stick to the strategy, and review investments annually, to ensure financial needs are being addressed and to avoid any potential losses.