There is a growing trend towards balanced mandates among investors who face a dilemma when choosing their investments, as they try to balance the trade-off between income and capital growth.
Certain investments, such as bonds, cash and property, provide a high level of income, but less scope for capital growth. Other investments offer good prospects for capital growth, but only produce a low level of income.
This presents a challenge for investors who may need current income, but also need to prevent capital erosion, in other words, drawing more income than that produced by the investment, which reduces future income.
Investors faced with this difficult choice between capital growth and income are increasingly addressing the dilemma by adopting a balanced approach, which involves mixing different asset classes to achieve a reasonable balance between inflation-hedged income and capital growth.
This involves fairly complex and high level decision making to combine the right high yielding investments, such as bonds, and the right investments that have the ability to grow their income, such as equities, in an optimal mix.
But what if investors could select a simple, straightforward investment that allows them to enjoy the best of both worlds: immediate and ongoing, inflation-linked income and capital growth?
This option is, in fact, already available, and thanks to its unique ability to create multiple streams of return, has been used by financial services giants and the world’s wealthiest for time immemorial to create wealth.
This investment alternative is a direct investment in an income-producing property, also known as buy-to-let property investment.
That while investors in buy-to-let property enjoy solid long-term capital appreciation on the property, as the value of the property increases over time, a buy-to-let property also produces a monthly income in the form of a rental. Investing in your education and time and leveraging from other people knowledge is key to wealth creation, the IGrow Property Investment club offers educational training videos and seminars where Investors and average South Africans can learn the simple strategies the wealthy 1% know to grow their wealth.
As the South African property market grows – “Long-term data shows that property values in South Africa over the past 20 years have produced solid capital growth of 10.5% on average a year.”
While property price inflation has been muted for a few years, he says over the long term, property price growth continues to keep pace with and even outstrip inflation.
“At the same time that investors are enjoying this long-term capital growth, they are also receiving a monthly income.”
The monthly rental income from a well-chosen buy-to-let investment property is not only ongoing for as long as the investors owns and rents out the property, it is also a passive income, since whether the investor is working or not, this income is earned every month.
“In addition, and perhaps most importantly, this ongoing, passive income is inflation-linked, which means it increases each year in line with inflation, or by a percentage stipulated in the lease agreement. It is therefore also linked to inflation, ensuring that the real returns produced by this monthly income remain positive, in other words, it keeps up with or outpaces inflation.”
Many investors are pleasantly surprised to find that investing in a buy-to-let property is much easier and far less risky than many believe.
Buy-to-let property investment is a simple, straightforward and proven way to ensure your capital grows and to secure an inflation-linked annuity income for life.