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Guide to investing

5 May 2011

Property is a must for any investment portfolio. Property historically has been the second-best-performing asset class, after shares and you can invest in property in many ways, involving fairly low-risk to very high-risk investments - and the latter include scams, while others such as buying a holiday home, timeshare and fractional ownership are not really investment choices.

  1. Buy-to-let
    Buy-to-let is a favourite way to invest in property, particularly when the market is booming and interest rates are low.

  2. Property development
    Residential, commercial and industrial property is developed both for resale on completion and to earn rental.

  3. Collective Investment Schemes
    The most hassle-free way to invest in property is through a pooled, or collective, investment.

  4. Unit Trusts and ETFs
    As of December last year, 24 property unit trust funds, including one ETF, but excluding the PUTs listed as securities on the JSE, were registered as collective investment schemes.

    Exchange traded funds
    An ETF tracks an index that reflects a stock market or a sector of a stock market. The ETF buys shares in direct proportion to the shares that comprise that index.

  5. Property Unit Trusts
    A PUT, which issues what are called participatory interests, should not be confused with a unit trust fund that invests part or most of its assets in stock exchange-listed securities.

  6. Property Loan Stock Companies
    PLS companies invest solely in property. They generate returns for investors from rental income, trading profits and, in some cases, the administration and brokerage fees that are generated by the PLS management companies.

  7. Property holding and development
    Property holding and development companies make up most of the companies listed in the real estate sector of the JSE.

  8. Real Estate Investment Trusts
    Reits are real estate ownership/investment structures that pay the income they generate to investors. The income is taxable in the hands of the investor.

  9. Life Insurance Investment Products
    Life assurance investment (endowment) products offer a range of underlying property investments, from balanced portfolios that invest in the main asset classes, including property, to portfolios that specialise in property and even in sectors of the property market, such as Liberty Life's hotel portfolios.

  10. Participation mortgage bonds
    Participation mortgage bonds (also known as part bonds) have been a stable and, more often than not, low-risk investment option that provide a steady income stream. Not surprisingly, they are particularly appealing for pensioners and conservative investors.
Article on Personal Finance





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