Financial Freedom Quick Tip #9: Stick with your investments

One of the biggest mistakes you can make with your investments is to constantly switch to “better” investment funds.

If you look at the returns of several funds over a the long term, they are usually not that much different.

For example: if you invest R200 pm for five years, and earn a return of 10%, you will receive R15,616 after five years. If you invest the same R200 pm over the same period, at a return of 15%, you will receive R17,936.

Hooray.

In our business we constantly see people terminate a good diversified investment, and start with a new one that will supposedly offer a better return, only to terminate that one again after another five years.

Every time you switch funds you also incur new charges in the form of commission and admin fees. There are cases where it is wise to switch, but this should be the exception to the rule. It is best to choose a good fund, and stick with it. Ride out the ups and the downs.

It is the effect of compound returns – that little thing Einstein called it the eight wonder of the world – that will grow your investments over time. The longer you stay invested the better the result becomes.

I got today’s Financial Freedom Quick Tip from Gerrit Viljoen, my dad, and the guy who taught me most of what I know about money. You can find out more about him and his company on the Ultima Financial Planners website.

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