The options available to choose from may vary from a high risk Equity fund where all funds are invested in shares, to a Stable fund where risks are reduced by diversifying investments between equities, international markets and even investing in some low risk money market instruments. Return on investment (ROI): A good Unit trust investment will outperform inflation over the medium term of 3 to 5 years. The rate of return will depend on the risk option that was chosen, but will ultimately depend on how well the fund manager has invested the money. Collectables: Risk: To deal in collectables requires a high level of knowledge and expertise. Any damage to something like a stamp collection, artwork or antiques will drastically diminish the value. Return on investment (ROI): If the article is truly a collectable, the value of the article will increase over time (provided there is no damage). The disadvantage of this type of investment is that there is no monthly source of income for the investor. Fixed deposit: Risk: Money invested with the bank generally has a very low risk. The investment can only be “lost” if the bank is liquidated. It has happened in South Africa that banks have been liquidated in the past, a relatively rare event. However, take note of the situation where African Bank was placed under Curatorship in Augustus 2014 to understand that even money in the bank, carries some risk. Return on investment (ROI): The interest rate offered on a fixed deposit will differ from bank to bank. It will also depend on the amount of money invested. Generally the longer the time frame and the higher the amount invested, the higher the interest rate will be. Despite this, it can only be hoped that the fixed deposit (even with cumulative interest) will exceed inflation. Unfortunately, it is often not the case. The only capital growth achieved with a fixed deposit is, if interest on the fixed deposit is capitalised (re-invested). Cumulative interest is then earned on the original fixed deposit and the interest that was reinvested. If the investor decides that the interest must be paid out to him/her to supplement his/her income, there will be no capital growth. The return on investment with a fixed deposit is usually low, but then, so is the risk associated with the fixed deposit. Money market account: Risk and Return on investment (ROI):
The options available to choose from may vary from a high risk Equity fund where all funds are invested in shares, to a Stable fund where risks are reduced by diversifying investments between equities, international markets and even investing in some low risk money market instruments. Return on investment (ROI): A good Unit trust investment will outperform inflation over the medium term of 3 to 5 years. The rate of return will depend on the risk option that was chosen, but will ultimately depend on how well the fund manager has invested the money. Collectables: Risk: To deal in collectables requires a high level of knowledge and expertise. Any damage to something like a stamp collection, artwork or antiques will drastically diminish the value. Return on investment (ROI): If the article is truly a collectable, the value of the article will increase over time (provided there is no damage). The disadvantage of this type of investment is that there is no monthly source of income for the investor. Fixed deposit: Risk: Money invested with the bank generally has a very low risk. The investment can only be “lost” if the bank is liquidated. It has happened in South Africa that banks have been liquidated in the past, a relatively rare event. However, take note of the situation where African Bank was placed under Curatorship in Augustus 2014 to understand that even money in the bank, carries some risk. Return on investment (ROI): The interest rate offered on a fixed deposit will differ from bank to bank. It will also depend on the amount of money invested. Generally the longer the time frame and the higher the amount invested, the higher the interest rate will be. Despite this, it can only be hoped that the fixed deposit (even with cumulative interest) will exceed inflation. Unfortunately, it is often not the case. The only capital growth achieved with a fixed deposit is, if interest on the fixed deposit is capitalised (re-invested). Cumulative interest is then earned on the original fixed deposit and the interest that was reinvested. If the investor decides that the interest must be paid out to him/her to supplement his/her income, there will be no capital growth. The return on investment with a fixed deposit is usually low, but then, so is the risk associated with the fixed deposit. Money market account: Risk and Return on investment (ROI):