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Before you jump in, consider these three essential points to investment success

by , 09 July 2013

When you make any investment, it's important to weigh up a few key points before you part with your cash. Of course, nothing is a certainty with investing, but by thinking these points through before you commit, you'll be in a much better position to profit…

Any investment decision you make requires a balancing of advantages and disadvantages, judgement on timing and future growth prospects, and matching what’s on offer to your particular financial circumstances and personality.

Three points to consider before investing your hard-earned cash

By weighing up these three points, you can try and make the best investment you can, explains the research team at The South African Investor

#1: Price
Price, absolute or relative, is pretty self-evident but all-important in the consideration of buying or selling an asset. You don’t want to end up paying more than you have to.

#2: Timing
It’s critical you get your timing right, but there’s no simple rule. Even the experts get their timing wrong.

One way to address this is what’s called “rand cost averaging”. This involves the allocation of a fixed sum of money each month for the purchase of the investments you favour. The advantage of this technique is you automatically buy more assets when their prices are depressed than when they’re buoyant. This means you automatically follow the sophisticated countercyclical investment strategy of the best financial institutions.

#3: The buy/sell margin
This is the difference between what you have to pay and what you get back if you resold the asset immediately to the seller. This is called the “in-and-out cost”.

Nothing is a certainty in life, but if you take the time to evaluate these points in your next investment, you’re sure to benefit over the long term.

Before you jump in, consider these three essential points to investment success
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