MAINTAINING THE BUYING POWER OF YOUR INVESTMENTS.

The purpose of investing in a financial product is to exceed or at least maintain the buying power of your investment over a given period especially long term.

EXAMPLE:

Invest one thousand rand, dollar or othe monetary equivalent at 10 percent per annum.

ONE THOUSAND RAND AT 10 % PER ANNUM = R100-00 IN INTEREST.

Deduct tax at 40 percent per annum on the interest earned    =                                                          R.40-00

Balance    after TAX deduction     =                  R.60-00                                         

Deduct inflation at 5% per annum of R1000-00             .                   =R50-00 

THE NET GAIN ON THE INVESTMENT

= R10-00

If inflation is higher than the 5% depicted above then the net gain will turn into a net loss.