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ONLY RICH PEOPLE INVEST
1. Most people still assume that you need a lot of money to start investing – this is 100% not true. Most asset managers and insurers encourage R500 or less.
A couple of weeks ago, I wrote an article on where you can invest even a few hundred rands.
Easy Equities and Satrix start from R250, and you can invest as little as R300 a month in Impact Investing from FedGroup.
You don’t have to be rich to start investing and enjoying the benefit of compound interest. Start today.
TOO YOUNG TO START SAVING
2. The age at which you start investing is more important than the amount. With a long-term view, the returns are constantly reinvested and the compound interest snowballs.
So, if you start investing a small amount in your twenties, you can easily build as much wealth over 40 years as a person in their thirties who wakes up and starts stashing away big chunks of money.
For example, Mpho invests R2 000 a year for six years from the age of 22 and stops contributing at the age of 28, but keeps her accumulated funds invested until she turns 65.
Zukiswa, on the other hand, starts investing at the age of 28 and contributes R2 000 a year until she is 65.
At 65, assuming that both investments attract a 15% growth rate, Mpho will have R3 083 497, while Zukiswa will have R2 334 995
The secret is time. Don’t wait until you have more money or until you are older to start getting your finances in order.
INVESTING IS COMPLICATED
3. Many people assume you need a degree in finance to know the ins and outs of how money works, but this couldn’t be further from the truth. It only takes someone who is dedicated to figure out how money works.
While there is a universe of investments and it might seem overwhelming, you just need to remember to take some time out of your schedule to learn about personal finance to become good at it.
Much like anything else in life, you have to educate yourself about a subject to become knowledgeable.
Remember that, when you started out in your career, there was a lot you did not know, but you are now comfortable with those demands because, over time, you learnt the ropes.
It’s the same with personal finance – you just need to keep on learning.
I NEED A FINANCIAL ADVISER
4. While I am an advocate for letting the professionals do what they do best, I believe that having some knowledge about a subject as important as personal finance is of great value.
Knowing certain things will allow you to approach financial services companies from a position of power, and you’ll know the right questions to ask instead of being told what is the right investment, saving or insurance product for you.
Better yet, you are not just sold a product, but you buy because you know its usefulness.
With companies such as Easy Equities, FedGroup, Livestock Wealth and a host of asset managers, you can invest directly in retirement annuities, unit trusts and exchange-traded funds without going through a financial adviser, possibly saving you a lot of money in the long run.
LAST YEAR’S WINNER A SAFE BET
5. On most if not all fund fact sheets, there is a disclaimer – past performance is no guarantee of future results. However, so many people still look at past returns when deciding which fund or asset manager to go for because most people are still chasing performance instead of looking at the fundamentals of the specific share or fund.
Because investors naturally want to time the market, they tend to think past performance can predict future returns, but this is false.
Investment research company Morningstar found that, during periods when the underlying unit trusts compounded at 9%, 10% and 11%, the actual investors in those funds only made 2%, 3% and 4%, respectively, because they were buying and selling at the wrong times and allowing their emotions to control them.
Myths are just that – they only feel like they are true because so many other people tend to believe in them. Go against the herd; do what is uncommon and reap the rewards.
Makhu is a financial coach
