I own a flat that I let out at around R4000 per month and the outstanding bond is about R225 000. If I have R5000 extra per month to invest, should I put it in the bond, unit trusts or a retirement annuity?
The answer is simple: if you are paying 10 percent interest on your bond, by investing an extra R5000 per month, you will get a 10 percent return on that money, with virtually no risk, so it's not a bad idea.
When the bond is closed, you will then have R9000 per month to put towards another investment (your R4000 rental income and the R5000). It is always a good practice to diversify your investments, so if you own one or two properties, you should consider an equity (share) based investment.
If you are employed, have a look at your company pension/provident plan, and make sure it is giving you a good return; if so, ensure that you are getting the maximum benefit from it in terms of tax, especially if it is a retirement annuity. If your company contributes towards the plan, it would be silly not to have a savings plan with them. Go to your HR department and investigate the options.
Another great place to invest is in Satrix; go to www.satrix.co.za for more information, as Satrix offers the ideal opportunity for the lay person to get into the stock market.
Unit trusts can be good medium- to long-term investments but all are not equal so you need to do some homework before you commit cash. In order to plan an effective investment strategy, you need a good independent financial planner to assist you.