Eight Things You Can Control When Investing

Are you a first-time investor? Satrix, South Africa’s leading provider of index-tracking products, has partnered with Money Smart Week 2022 to guide South Africans on starting their investment journey. Part of this involves demystifying Exchange Traded Funds (ETFs) and having the confidence to stay the course, even when the markets get rocky.  

Investing is said to be the same as saving, right? Actually, it’s not the same at all. Saving is essentially not spending money; it means keeping it safe, often in an account with no or very low interest. Investing, on the other hand, involves growing your money over time. Investing is a powerful way to your journey to financial independence.  And it is not only the domain of the wealthy.  

Duma Mxenge, Business Development Manager at Satrix, says you can start investing with as little as R10 a month. “The important thing is to choose an investment product that suits your time horizon and risk profile.”  

ETFs are a good way to kick-start your portfolio because they are easy to understand, transparent and cost-effective. Simply put, an ETF is a fund which is traded on a stock exchange. The ETF invests in an index, which means you can buy the top 40 shares on the JSE with a single trade, by buying the Satrix Top 40 ETF, for example. There are many ETFs which track many different indices, so you have a choice of where you invest your money both locally and globally.  

This Money Smart Week is as good a time as any to start your investment journey. Mxenge offers some simple tips on how to become an investor.  

Get Started, Even With A Small Amount 

Start with as much as you can afford – from as little as R10 a month if that’s all that’s possible. Remember investing should fit within your broader financial picture. The amount you allocate to your investment is unique to your circumstances. The point is to have a goal and a clear plan on how to achieve your goal and stick to it.  

Time  

Commit to a time frame upfront and do not change it. Investing is, at a very minimum, a five-year commitment. Why is this? In the short term, share prices are likely to rise and fall because of what is in the news, trading activity and short-term economic data. Over the long term, fluctuations will even out, and your investment will grow steadily.  

Fees  

Keep them low. The fees you pay on an investment directly affect your net return. The less you pay in fees, the more performance you get to keep.  

Asset Allocation  

Asset allocation deals with how your portfolio is constructed and, particularly, the risk you can bear, which very much depends on the time you have. Short time frames (6 to 18 months) mean you are better off staying in cash or money market assets. Anything longer requires careful thought about the asset classes you would like to invest in for a given outcome.  

Investing comes with different degrees of risk. Every investor has a different risk appetite – which means how much risk they are willing to take on – and time is also a major factor. For example, if you are 27 and decide to start saving for retirement, you can afford to take more risks because there’s plenty of time to recover from periods where the market doesn’t perform well.  

Advice  

If some of this article has sounded a bit complex, remember you are not alone. Financial Advisers are professionally trained to help you with your financial and investment journey. Life is too complex to be an expert in everything, so outsource to a good adviser. They should provide you with a holistic plan and the confidence to stay the course, and the markets will do the rest. 

Tax 

Minimise your tax on investing by using your full tax-free savings account allocation and maximising your retirement annuity contributions. Both allow you to save tax.  

Have A Plan  

You plan most other things, so why not your finances? This goes beyond a simple budget. Have short-, medium, and long-term goals. Understand what retirement may look like. How far will your current pension fund contributions get you when you are 73, for example?  

Avoid The Noise 

There are many opinions in the investment world. Frequently, something will happen that will cause panic and knee-jerk investment decisions. Try not to ‘go with the flow.’ Rather, speak to your Financial Adviser and do your research. Often, doing nothing is the best course of action. Control what you can and avoid getting caught up in the hype.  

Think of it this way; if you had started two weeks ago, you would be two weeks into it, better at it and along your path to achieving your investment goal. It is never too late to start, but the sooner you get going, the better for your financial confidence and long-term wealth building.  

Disclaimer: 

Satrix Investments (Pty) Ltd is an approved FSP in term of the Financial Advisory and Intermediary Services Act (FAIS). The information does not constitute advice as contemplated in FAIS. Use or rely on this information at your own risk. Consult your Financial Adviser before making an investment decision. 

While every effort has been made to ensure the reasonableness and accuracy of the information contained in this document (“the information”), the FSP’s, its shareholders, subsidiaries, clients, agents, officers and employees do not make any representations or warranties regarding the accuracy or suitability of the information and shall not be held responsible and disclaims all liability for any loss, liability and damage whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance upon the information.