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Investment checklist

INVESTORS are faced with a huge menu of options and opportunities when deciding to invest or save.

These are just a few: starting a business, buying into an existing business, buying a franchise, bank savings, endowments, unit trusts, retirement annuities, pension and provident funds, preservation funds, living annuities, guaranteed products, stokvels, listed equities and derivatives, residential or commercial property, property syndications, real estate investment trusts, collective investment schemes, participation mortgage bonds… the list is seemingly endless.

So, not only are you faced with the stark reality that you need to plan for your retirement, save or invest for growth (to hedge against inflation) with whatever resources you have, you also have so many options that it’s probably easier to stick your head in the ground and avoid making a decision.

Not to worry – many of us feel that way.

Most investment choices are managed on your behalf, but if you wish to take a more proactive role in managing your hard-earned cash, you need to give a lot more thought to the process before handing over your money.

Let’s assume your financial adviser has comfortably guided you in the right direction and by way of example only, and to spread your risk, you have narrowed your investment options down to four primary categories:

  1. cash (savings)
  2. equities (JSE)
  3. property
  4. an annuity of some description

You are probably entering into these investment choices for two reasons: to ensure a comfortable retirement, and to secure a legacy.

Take the time and the trouble to consult your attorney and/or tax adviser to ask as many questions as you can:

• What vehicle should you use to invest – i e in your own name, in a trust or a company?

• If you intend starting a new business, buying into an existing business, or acquiring a franchise, what are the risks and benefits of partnerships, sole proprietorships and companies?

• What are the tax consequences associated with the options?

• What are the risks and benefits of using a vehicle to interpose between yourself and the counterparty offering the investment?

• Is the investment ringfenced against creditors in the event of claims against your estate?

• What are the estimated annual costs of compliance and ‘maintaining’ a special purpose vehicle?

• What are the basic regulations governing such a vehicle?

• How do you access, for personal use, any distributions, dividends, interest or income of any other description attributable to your special purpose vehicle?

• How is the vehicle wound up, and the proceeds distributed to you or your estate?

• How do you provide for it in your will – i e do you elect to have it wound up and the proceeds distributed, or managed by a third party (asset manager) with your beneficiaries enjoying continued use and benefit of and from the vehicle?

There are many more factors to consider, so before you put your pen to paper, consider whether or not you should be investing in your own name, or through an SPV.

– Fin24

*Daryl Ducasse is an investment manager at Merkurius Capital Solutions.

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