Realistic Returns

Sep 8, 2013

If it sounds too good to be true then it probably is.
Returns are made from the yields of assets.


Cash produces interest
Property yields rental income
Bonds produce fixed interest
Equities yield dividends

Property and Equities can also appreciate in value which further enhances yield. Offshore assets can also appreciate in rand terms went the currency weakens.

Synonymous with returns is risk. It follows that the higher the returns you expect the more risk you need to take on your investments.
The investment spectrum relative to risk starts with

Cash 5% Short term
Bonds. 6%. Short medium term
Property 8%. Medium long term
Shares 12%. Long term

Many unit trusts have a mix of these assets in various weighting a according to their mandate. So when we hear that the stock market has reached an all time high your investment probably will not have attained the same returns as it may only have a portion exposed toe the markets. Same applies to the currency changes. If the rand weakens only the assets linked offshore will be affected.

So, when a return is offered by a provider of 30% in the short term then be careful. Check out the assets that make up the investment they will have to take on high risk to attempt this amount of return.

Investing follows a time horizon and is not speculative. Quick returns are found in the casinos and not in your investments. Only compound interest over time will give you realistic returns.