Investment – it’s one of the first things many people think of when they retire. Some use their lump sum to move to somewhere warm. They then place the rest in a savings account and watch the interest grow. Others hold on to some of their savings but invest the rest for even more comfortable years financially.
If you’re retiring and looking to invest, you may be wondering whether to invest directly or indirectly. Here are some facts to help you make your decision.
Getting to the point — direct investment
When choosing who to invest in, you should read the financial press regularly. Direct investment means that you buy shares directly in a single company, so you should read about the company, especially the prospectus if it’s offering new shares. Be on the lookout for past developments or incidents that have influenced its performance. For instance, if a car company has made headlines more than once for faulty components, you’d probably want to invest in something else.
Although your first thought probably is to invest in companies on the Dow Jones, the NASDAQ or other major stock exchanges, be open minded when investing directly. Countries like Egypt and the UAE have weathered the international financial crisis better than many others. Economic reforms in Egypt and supervision of the banks have helped the country fare better, while favorable oil prices have buoyed the UAE economy and the Dubai real estate sector is also making a recovery. You may consider companies in these sectors or which are listed on these stock exchanges.
Don’t just go by the gains you wish to make, though. Consider too the level of risk you’re prepared to take on (your investor profile). Are you a prudent investor or a dynamic one? Different types of investment carry different levels of risk. Dynamic investors take on more risks, but are also rewarded with higher returns on their investment.
Remember that investing in shares is a long-term project. At least, it is if you want to make good on your investment. Buying and selling shares quickly can make you lots of money in a short space of time, but the charges for buying and selling can eat the profits up.
Do you really need to be so direct?
If you want to reduce the risk slightly, rather than speculating directly on the stock exchange, you may opt for an indirect investment, such as a collective investment scheme. A unit trust is one worth considering, since they spread the risk by investing in different companies. You can also increase your investment, if you wish to, at your own pace by buying units.
Don’t forget to check out the investment options that your bank offers. Banks normally offer investment amongst their personal finance products and services, such as global investment funds. They can manage the investment based on your investor profile, as well as advise you on your investment.
Investing your savings is a serious business… exciting, but serious. You should do plenty or research, consider what you hope to achieve from your investment and how much you’re willing to risk to achieve it. Then you’re in a good position to proceed with your investment and enjoy the fruits of your money’s labors. Happy investing!