How suitable are share investments?

Should shares form a part of my overall financial portfolio?

Name withheld

Suzette von Broembsen, wealth manager at PSG Wealth, responds: There is no simple answer to this question without a risk analysis being done as we each have different financial objectives and risk tolerances. The general goal of investment is to earn interest/a return which will either provide an income and/or increase the value of the initial amount invested. The investment objective coupled with your individual investment constraints will determine the suitability of a particular financial instrument such as shares in your case.

The most important concept to understand is that buying shares or equities basically represents part ownership in a company. Investment in shares/equities should ideally be seen as a longterm investment. Over time, investors generally earn more on a portfolio of quality shares than when keeping their money in a savings account.

This is because money in a bank account will be aligned to the interest rate, and it’s unlikely that you’ll beat inflation by leaving your capital in the account over the long term. Tax efficiency is another advantage to consider, as equities are normally taxed more favourably than money in the bank.

Getting the guidance of a skilled financial adviser is important, as your exposure to equities should be tailored in line with your risk profile as part of a balanced portfolio.