When we look at investing, it is a journey, and one should regard it as such. Just like you would plan, prepare, and pack for a trip, one should apply the same mindset when investing.
What do I need from the investment? What is my ultimate goal? How long will it take me to get to my goal? Am I willing to take a conservative or high-risk route?
Therefore, the decisions you make should align with the above. At Simonis Storm, we would encourage a holistic approach to investing. Make sure to ask yourself the following questions:
Have I made enough provision for retirement?
* 15% of your income should be from a pension or retirement fund.
Do I have an emergency fund?
* At least three times your monthly income should be set aside for an emergency. Make sure to define a crisis.
Have you made provision for your child/children’s education?
* Also include provisions for your dependents to be financially secure when you die.
Once you have the above in place or progress, and you’ve managed to save some money that you are now ready to invest, it is essential to look at the different investment vehicles.
Let’s look at some options for N$100,000.
Below is an indication of an investment in the money market for 12 months.
* The money market is very low risk, so your capital is guaranteed.
* The rates on the money market fluctuate daily; below is the current rate. The rate provided is net of withholding tax.
* You earn compound interest on a money market account.
* You can access your funds within 24hrs
* Additional investments into the money market account are allowed at any time.
* No withdrawal charges
* Monthly fee of N$25.00 (only fee applicable)
Treasury Bill (TB)
Treasury bills are secured investment vehicles provided by the Bank of Namibia with very low risk.
Below are the available time frames and the interest you could earn.
* Note that a treasury bill is purchased at a discount. So, the consideration is the amount you invest, and the nominal is the amount that matures.
* Treasury bills are tradeable, so that you can sell them anytime.
* Should you invest in a 6-month TB, and you need to sell it before the six months have lapsed? You will only receive the interest accrued to date, not the nominal amount.
* No additional investment is allowed, but you can purchase multiple treasury bills.
* The fees applicable are a percentage of the rate at which it is obtained. Normal between 0.20 – 0.30% once-off.
* Your interest is tax-free for Namibian individuals and trusts.
Low risk, high returns, and regular income.
* Government bonds are usually for longer terms and provide interest on the capital amount and annual interest for the entire investment duration. The good part is that the yearly claim you receive is based on the maturity amount, not the invested amount.
* Interest is also tax-free for Namibian individuals and Trusts.
* The annual interest is paid out bi-annually
* The fees applicable are a percentage of the rate at which it is obtained. Average between 0.20 – 0.30% once off.
* Bonds can be sold in the secondary market as they are also tradeable.
* No additional investments, but you can have multiple bonds.
* A guaranteed investment that gives you complete peace of mind.
Investments such as unit trusts and share portfolios can become very pricey and require a fair amount of risk appetite. Investments are not guaranteed; the fees range from 1 -1.50% per annum and would generally be considered for an amount of N$250,000 or higher. These investments are proposed when you already have existing low-risk investments in place and when we start looking at diversification of your investment portfolio.
Always keep in mind the rate you receive on an investment. Preferably interest that is not subject to withholding tax. 10% tax on your interest earned makes quite a difference, and what are the fees and penalties for early exits?
Does my interest in my investment cover inflation? If you are invested in an instrument that provides you with a lower rate than inflation (currently at 4.7%), then your money will have little value in the future. Your funds need to grow with inflation. Otherwise, you will have the same N$100 in 5 years that you have now, but the purchasing power of that N$100 is no more than N$70 – N$80 in 5 years.