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Pay off your mortgage or invest?


 
  
  
  
  
  
  
  
  
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A SampleCompany 3 November 2020
 
 
 
Should You Invest Your Extra Cash or Pay Off Your Mortgage?
 
A common financial question that South Africans have is what they should do if they receive a large lump sum of cash – whether that is an inheritance, or a windfall of some sort. 

Provided they have the discipline not to spend it, usually they see two options. The first is to invest it. The second is to pay off their debt, and often specifically their mortgage.

It is impossible to give a simple answer to which of these is the better approach, because everyone’s circumstances are different. There are, however, a few universal considerations that anyone who has this question can think about. Read on to find out more.
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 Why Trying to Avoid Risk Can Be Risky  
  
  
 What to Think About When Choosing Your Medical Aid Option For Next Year  
  
  
 Is Your Will Valid?  
 
  
  
  
  
 
  
  
  
  
 
 There is no such thing as a ‘perfect investment’. Everything carries some sort of risk.

In the stock market, the risk is that share prices will go up and down, and from week to week, month to month, and sometimes even year to year, the value of your investment could go up and down a lot. If you put your money in the bank to avoid that volatility, the risk is that the interest you earn after tax will be less than inflation, and so you will be effectively losing wealth.

Understanding this is important to making informed investment decisions. It is also important to understand that anyone who tries to convince you that they have a risk-free investment is not being completely honest with you. 		 
  
  
 After a year like 2020, it is clear how important medical aid cover is. This is not something that you ever want to be caught without when you need it.

Choosing the right plan for you and your family can however be difficult. There are always a number of options, and it is not easy to determine which one is most likely to be the most appropriate.

Here are some ideas of what to think about when considering which plan to choose for the coming year. 		 
  
  
 We live in particularly dangerous times, and making sure that our affairs are in order is perhaps even more vital for us all than before.

Leaving a will in place is of course the only way to properly protect your loved ones after you are gone. Take steps now to ensure that it will be accepted as valid and that there is as little danger as possible of it being challenged in any way.

That’s not as straightforward as it may seem, and there are many pitfalls awaiting the unwary. We discuss five mistakes to be especially avoided when making a will, and we share some tips on how to avoid them…  		 
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Quote of the Month: No Profit in Yesterday’s Growth
 
Victoria Reuvers – MD of Morningstar Investment Management SA

“To quote the legendary Warren Buffett, ‘the investor of today does not profit from yesterday's growth’. As much as we are warned that past performance is no guide to the future results, many investors still switch to the latest hot offerings.

“Investors should remember that returns don’t happen in straight lines and they seldom occur when one expects them to. It’s vital to separate emotion/sentiment from an investment portfolio. Often the most beleaguered investments turn out to be a great opportunity for future returns, as investors can access these investments at a good price. Volatility creates opportunity and short-term underperformance can translate into a solid, longer-term upside.

“Trying to chase performance can be extremely harmful to an investor’s returns over the long-term. It’s rare for even professionals to consistently time investment in to and out of the market over time. Besides, one needs to consider the costs of trading funds, which is likely to only make matters worse.

“A well-diversified portfolio that is designed to meet your investment goals whilst remaining within your risk tolerance is a far better solution, and much likelier to result in long-term investment success than trying to buy yesterday's winners.” (Emphasis supplied)
 
 
 
Disclaimer

The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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