Is It Smart to Invest with the Current State of the Economy?

Mar 07, 2016
Author: Ean Barnard

Is it smart to invest at this very moment?

South Africans are in a difficult situation now. Inflation rates are rising. Costs to borrowing are also rising. It is not the easiest of times to repay loans.

That is why it is exactly the time to start investing. If it is possible, it is time to save up every available cent to be invested in a well-diversified portfolio. It is not the time to take out loans beyond your means of repayment. Well, it never is, but interest rates are bound to rise again in South Africa which will only add more pressure on borrowers.

Key Points for You to Consider To Invest

1 - In times of high-interest rates, it is more favourable to invest rather than to borrow. This brings about the effect of compound interest to work in your favour. Much better than interest accumulating on your debt.

2 - In hard times like now, it is wise to think and plan ahead when you are investing. If a recession should hit South Africa, an offshore investment will prove very handy. It is in many cases also a wise move to invest offshore regardless of the situation you find yourself in. But when the value of the Rand does fall and you are the holder of an investment in another currency it will count towards significant financial gain for you.

3 - Your investment goals should be in line with a reasonable strategy. The short term risk to investing is simply too high right now. The inflation rate is rising. The Rand is weak. South Africa’s drought will most certainly also make food prices rise in the short term. Choose to be patient and invest for a medium to long term return.

4 - Make sure you know what you are investing in. If you don’t understand your investments  you could run the risk of losing money when you can’t make the changes the financial markets call for.

5 - Savings Accounts are certainly a good step towards saving money, but they generally offer very low-interest rates. Compare that to the current inflation rate of December 2015 in South Africa which is at 5.2%. This means that unless your savings account offers you an interest rate of more than 5.2% your money will lose its value over time as it stays in that specific savings account. Look to use a savings account more as budgeting tool rather than an investing tool. The South African economy still has much to offer. It is time for consumers to realize the seriousness of the time and the change it calls for. Start investing to grow your wealth. Now is not the time to play catch-up with your debt. Rising interest rates, rising inflation rates, the weak Rand and rising costs to debt doesn’t bode well for the average borrower.

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