![]() Inflation refers to the decrease in the value of money over time (it's called inflation because the cost of goods inflates over time). Ī guaranteed or life annuity is essentially an insurance product that pays you a guaranteed income for a set number of years or for life. You can contact the FSCA if you feel you've been unfairly treated by a financial services provider registered with the FSCA. This industry body regulates the conduct of South Africa's financial services sector. Their job is to help you lower your financial risk and build wealth over the long term.įSCA (Financial Sector Conduct Authority) The FIRE movement encourages investors to strictly control their lifestyle expenses, save a lot, and only withdraw 4% of their portfolio annually once they retire.Ī financial adviser or financial planner is a professional who can help you with all kinds of financial planning. The value of the shares issued by a company.įinancial Independence, Retire Early (FIRE) is a movement that centres around the idea that you can retire whenever you have enough assets to sustain you for life, rather than at any specific age. This spreads your risk and minimises the chances of your investments performing poorly. You can diversify by investing in different asset classes, sectors, companies, geographies and currencies. Once you retire, you can use dividend payments as income.ĭiversification is a way to manage risk when investing. When a company shares profits with its shareholders (investors who own shares in the company), the cash amount paid out to them is called a dividend. The lower your drawdown, the higher the chance of your savings lasting and the more money left over for your loved ones when you pass away. If your drawdown percentage is too high, you'll outlive your savings. Dependants can receive the benefit pay-out on your retirement products if you pass away.Ī drawdown percentage is the portion that a person withdraws each year from their living annuity. This refers to someone you are legally or financially responsible to maintain, such as your children, spouse or parents. In other words, it's the risk of putting too many eggs in one basket (see Diversification, which can help with this). If something goes wrong in that specific asset or sector, more of your portfolio performs poorly, dragging down your overall performance. Compounding is the simplest way to create wealth, because money you already worked for keeps earning you more and more.Ĭoncentration risk refers to the risk you take when you invest too much, relative to your overall portfolio, in a single company or sector. ![]() When you leave that extra money in your account, the next time you earn, you'll earn on your original amount plus on the interest you've gained. When you save or invest, you earn interest or dividends on your money. Capital gains tax, or CGT, is the tax you pay on part of that profit. When you sell an asset at a higher price than you paid for it, the profit you make is called a capital gain. This is an informal term often used in South Africa that refers to the extra financial support that black professionals are expected to give their extended families each month (see Sandwich generation).Ī broker is a person or a company that organises and carries out financial transactions on your behalf. The person to receive the benefit payout on a policy.īenefits change at a certain point in time in line with client needs. Examples of asset classes are equities (stocks), fixed income (bonds), cash and cash equivalents, real estate, commodities, derivatives and their global equivalents. You can own all kinds of assets, from property, equipment and jewellery to investments that you've bought (like pension plans), shares in a company, or even money you've lent out.Īn asset class is a group of similar investment vehicles. They aim to ensure that the industry and its members stay relevant and sustainable by promoting a culture of savings and investment.Īn asset is something of value that can be exchanged for cash. This organisation represents the interests of the country's asset managers, collective investment scheme management companies, linked investment service providers, multi managers and life insurance companies. For example, a retirement annuity is a product that lets you save towards retirement and a living annuity is a product that provides an income in retirement.ĪSISA (Association for Savings and Investment South Africa) So if you are 40 years old, you should have 70% of your portfolio invested in equities.Īn annuity is a stream of income paid out at regular intervals. ![]() This refers to an investing 'rule' some researchers advocate which states that the percentage of money that you have invested in equities should be equal to 110 minus your age.
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