Investment 1: Property
For most of us, a house is our biggest purchase ever, and your home is an investment – a big one at that – but don’t simply assume that it will always be an appreciating asset, that is, one that keeps growing in value. What if you bought an old house that ends up costing thousands in maintenance each year? Or what if the neighbourhood is less up-and-coming than you had thought?
That’s why it’s important to check out a house carefully and do your homework on the area before signing on the dotted line. Talk to estate agents or even homeowners in the neighbourhood and check if property prices have been increasing or decreasing.
Websites like Property24.com have a handy search function that allows you to find the sales prices in an area. Once you’ve bought a home, it’s important to have regular valuations done to see where you stand.
Investment 2: Retirement savings
Putting money into a company pension fund or retirement annuity is definitely an investment. To make it an appreciating asset, however, it has to meet your needs, and pay you more than what you have put in. Make sure you understand your company pension fund and find out if you may have to supplement it.
Investment 3: A car
Because cars are expensive, many consider them an investment. If it helps you to get to work so you can make money or take your children to school, it is possible to see it as an asset.
In terms of value, though, it is a depreciating asset. That’s because cars, especially brand-new ones, lose up to 20% of their value each year. Taking out a big loan at a high interest rate to buy one makes it even less of a good investment.
Investment 4: Electronics
As with cars, we tend to view the latest flat-screen TV, smartphone or laptop as an investment. And as with a car, if your computer or phone helps you to do your job or run a business, you won’t be entirely wrong.
However, electronic goods lose their value even faster than cars, so don’t think of them as investments, or even as depreciating assets. They are simply consumables, and if you buy them on credit you will end up paying even more, making them very expensive purchases.
Investment 5: You
One investment that would almost certainly grow in value is your health. Paying that little bit extra for healthy food, gym membership, fitness classes or a pair of good running shoes will pay off as you grow older by helping you to stay physically and mentally healthy and fit, in turn allowing you to continue earning an income, even after retirement.
Are you about to make a big purchase?
Speak to an Old Mutual financial adviser about how best to finance it. Call 0860 606 067.