One of the best ways to make your money "work for you" is to invest it wisely, but many of us are afraid to take the plunge because investing seems complicated – something reserved for only certain people.
However, argues Lance Solms, managing director at Itransact, it's not that complex, and it is for everyone — but like most things, a little literacy goes a long way.
He has shared some investment terms that will help fill our piggy banks of investment literacy, and assist more of us to start or take the next step on our investment journey:
- Tax-Free Savings Account
Tax-free savings account (TFSA) is an effective way to save for your goals, because any interest, dividends or capital gains will be free of tax. A TFSA may contain one or more selected passively managed index funds that track indices by holding the physical assets of the indices they track. These are traded like shares on a stock exchange.
- Retirement Annuity
Retirement annuities are low-cost, penalty-free investment products that you can get through your financial adviser that track the market according to pension-fund regulations. This is achieved by investing in a basket of low-cost index funds that represent domestic and international money market, fixed income, property and equity indices.
- Preservation Fund
Preservation funds are low-cost, penalty-free investment products that preserve pension fund assets when one changes jobs. They track the market according to pension-fund regulations. This is achieved by investing in a basket of low-cost index funds that represent domestic and international money market, fixed income, property and equity indices.
- Living Annuity
Living annuities let you choose and switch between low-cost, penalty-free, risk-adjusted index portfolios. These track the market by investing in a basket of low-cost index funds that represent domestic and international money market, fixed income, property and equity indices according to an asset allocation model that is risk-adjusted. Beneficiaries nominated by you receive the residual value, free of any estate duty, on the death of the annuitant.
- Index Funds
Index funds are passively managed unit trusts that track indices by holding the physical assets of the indices they track. These are traded like shares on a stock exchange. Index funds may track one or more domestic or international equity, bond, property, commodity and money market indices. You can manage your index fund through a registered financial adviser or robo-adviser.
- Index Fund Portfolios
Portfolios are discretionary managed portfolio products that track the market by investing in a basket of low-cost index funds. These baskets represent domestic and international money market, fixed income, property and equity indices according to an asset allocation model that is risk-adjusted.
You can get these products through a registered financial adviser or through the digital robo-adviser platforms.
"Investing terms – like anything else related to financial education – require extensive research and time to study, in order for you to get fully immersed and understand them. Speaking to your financial adviser should be the first step in getting to grips with your financial terms, and beginning to build a strong foundation that will allow you to make savvy investments that truly make your money work for you," concluded Solms.