Inflation discounts the value of your money over time.
The official inflation rate or CPI is an average rate of price movements based on a set weighted basket of goods and services over time.
The average rate points to how the value of your money is discounted over a period.
The higher the rate persists then the less your money will be worth in the future.

Advice fees either improve or erode the value of your money over time.
If your financial advisor is adding value to your financial planning through qualifications, knowledge and experience which in turn translates into the delivery of your expectations then the fees you pay are worth it.
If you can do everything yourself then you can save the fees. so it depends on how much you are prepared to do on your own.

Admin fees are charged by service providers and they vary according to the functionality and service that they provide. These fees will affect the value of your money over time.
Many providers off a sliding scale of fees based on the total value of your investments made with the provider.

Fund management fees will erode the value of your money depending on how successfully the fund outperforms its benchmark.
If there is no outperformance greater than the fees over the performance of the benchmark then you would be better off investing in the benchmark directly.
For example, equity fund managers may choose the Satrix Top 40 as its benchmark and charge a management fee of 2%. The charge of Satrix is bout 1% per annum, so the fund will have to outperform it by at least 1% just to break even. Many funds don’t manage to do this consistently over time.

Tax will erode the value of your money over time.
One of the most ignored aspects of investments is the various taxes that are applied to them.
Endowment policies are taxed at a flat rate depend ending on the entity that owns it.
In the case of an individual, the rate is 30% on all interest earned from bonds and cash which are derived from the various funds that you choose.
Dividends are taxed at a flat rate of 15%.
Capital gains tax is also applied to all investments once you dispose of them.

The cost of debt is an opportunity cost.
The longer you stay in debt the more interest you will keep on paying your creditors. The quicker you pay off your debt the sooner you will be able to divert the interest payments to investments which can
increase your wealth and lead to away from decency on institutions to your own financial independence.
The exception is when one borrows to invest in an asset at a lower rate than it appreciates by such as a property.
Conversely, why cars are not investments?

Compounding catapults the value of money into the future provided the net return is above the prevailing inflation rate.
The magical effect of interest on interest compounding over time is where your money greatly appreciates in value. The highest net returns that you can achieve over the longest period of time will
provide phenomenal returns on your investment.

What is the best investment for you? Is there such a thing as best? How do you go about choosing one?
The best is only found in the rearview mirror. Therefore best is only known when you’ve passed it and you can look behind. So best cannot be predicted into the future. The way forward should rather be determined by what is appropriate for you and your circumstances. This often is more about investing appropriately according to your lifestyle needs taking your risk profile into account, rather than setting out to chase the highest returns.

For example, someone who has a few years to retirement should not be 100% exposed to shares as there is a considerable downside risk of losing capital which should be there to provide for income.
At the same time, someone in their mid 30’s wishing to build up capital over 10 years will probably do well to save monthly into shares through a unit trust or exchange-traded funds.

This points to realistic expectations measured against one’s circumstances. A function of financial planning.
Some ideas on how to manage one’s expectations and plan appropriately.

It’s all about risk versus returns. A successful plan is not based on the highest returns achievable. In fact, you may be exposed to far too much risk relative to your situation if your returns are too high. High returns do pay off more times over the long term but in the short term, they sometimes don’t. This is why we advocate shares for the long term.
Therefore the plan is all about appropriateness. Where are you now in relation to where you want to be financial?
As a rule of thumb
Short term 3 years – conservative
Aim:
To protect capital, beat current interest rates after tax, and keep up with inflation.
Money market, bonds, capital protection investments, segregated funds

Medium-term 5 years – moderate
Aim:
Diversification across all asset classes to beat inflation by 3% after tax and fees
Unit trust balanced funds,

Long term 10 years – assertive
Aim:
Optimum exposure to equities to beat inflation by 6% after tax and fees
Unit trust equity funds, Exchange Traded Funds, shares,