It’s not about how much money you invest, it’s about getting into the savings game as early as possible, with whatever you have available, says Helena Conradie, CEO of Satrix.
Talking to a packed audience at Moneyweb’s recent Money Expo, she acknowledged that for many people ‘just starting’ is easier said than done. The world of investing – with its jargon, myriad of choices and service providers can seem impenetrable. How does one even begin? Conradie makes it simple. There are three steps, she says. “One. Draw up a budget. How much are you spending? What can you afford to save? Two. Get rid of debt. Debt is like rising damp – it creeps up on you.”
Thirdly, invest wisely. “This is the most difficult part, but the most important.”
Her mantra is ‘keep investing simple.’
“You need to understand how much risk you can tolerate, what return you are looking for and what your time frame is.” For instance, if you need access to your cash in 18 months then you are looking for a low risk, very liquid investment.
Once you have made the decision to invest, what are the building blocks available? These are cash, bonds, property and equities. “You don’t need to invest in all of these,” she adds. The choices you make depend on your specific circumstances. “Cash offers the lowest risk, but the lowest return, while equities are risky, but offer the best return.”
While equities may be risky over a short term, investors cannot ignore them. If you had deposited R100 into a bank account and checked the balance today, you would have earned R23 000. If you had invested in the JSE top 40 over that period, your R100 would have turned into R800 000. “This is the power of the equity market,” Conradie says.
Using a different example, if a 25-year-old worker invested R100/month into a unit trust, they would earn R640 000 by age 65, assuming a 10% return. While that may not be enough to live off, consider what happens if you start investing at 45 years old. To achieve the same return one would need to invest R840/month – such is the power of compounding.
“If you can teach your children one thing – it’s to start early. That said, it’s never too late – just start,” she says.
Once one had made the decision to invest in equities, what then? Do you invest directly into listed stocks? Or perhaps choose one of the 1360 unit trusts on the market.
For Conradie, who is invested in her own product, the answer is simple – pick a Satrix unit trust or ETF. She recommends the Alsi Top 40 as a fund for investors to start with. From there investors can be more selective, chosing the Divi Plus for income, the Rafi for companies whose fundamentals are strong or fixed income, balance or offshore funds for those who want to diversify a little.
For investors who want to invest far smaller amounts Satrix has launched SatrixNow a low cost option that opens up a narrower version of the Satrix universe to those who want to invest smaller amounts. “We have no minimum investment amount,” Conradie says.
The registration process is simple and the costs are very transparent, she says. “This is about removing the fear of investing. What is important is that you start.”
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