Shares or property?

A Fin24.com user asks:

I invest R12 500 per month through Discovery Invest (Equity Fund Class A, Flexible property Fund, Equity Feeder Fund, Money Market Fund). Obviously these investments have lost value over the last few months - my adviser tells me about 8%. I own two properties, one bond-free and the other with a R480 000 outstanding bond.

I calculate that if I stop investing, allow the funds to remain in the present investments and take the R12 500 to pay into my bond I can pay the property off in just over two years (current market worth of the property is about R650 000) and then begin to invest again.

I am 56 and want to retire in the next four years. I can let the property for about R3 000 per month at present (obviously more in the next year or so), or sell it off once paid up.

In the present climate this seems like a good idea to me, but I am unsure.

Dynamic Wealth responds:

Your reasoning is very sound.

However, to maximise your investments it is recommended that you first analyse whether it would be the best to only repay your bond, compared to using the R12 500 to partly repay your bond and partly continue with your investments. In other words, the optimum combination of the two investment options vs only repaying your bond.

Remember that lower share prices also mean you will now purchase more units of the share with the same amount than you could before.

When share prices recover, you will own more units (compared to if the share price had remained the same) and thus receive more growth. Your financial adviser should be able to assist you with these calculations.

- Dynamic Wealth is a leading provider of specialised financial services. The group is focused on providing wealth management to high net worth investors, both private and corporate.

Visit Dynamic Wealth's website (www.dynamic.co.za or call 0861 80 2000/3000/4000/1300.

- Fin24.com