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Investing: Just do it

Investing does not have to be complicated or elitist

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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I wish all school leavers would read and do this. My father wanted half of my first hard earned salary cheque, all R50 rand of it in 1974. I was very unwilling but gave it to him and every half after that. He then invested in UAL, one of the first unit trusts in this country. When he thought I was mature enough not to blow it he handed it over to me. I carried on investing half my salary, never touching it and always re-investing dividends. Only years later did I work out the wisdom of this type of investment. It mirrors the big investment houses with annuities and RA’s and endowments when they still had them.
I did the same with my children but fine tuned it so that they beat inflation from the start and not a number of years into the investment. I chose a fund, and kick started it with a lump sum that would in the first year generate enough interest and dividends to be equal to 2 of the monthly contributions that my children could afford. It was not long before the fund was contributing the same as the children’s monthly payment. Needless to say they have never invested in annuities or RA’s. One large life policy and their own retirement fund without agent’s commissions.
Later in life you can increase your own contributions, reduce if need be, cash in and move into direct equity, but all the time knowing that it is not easy to spend on a whim at the Harley Davidson dealer with the swipe of a card, which means that come Monday the urge to spend has past and sanity prevails. If you want to you can start a new fund to diversify and leave the other one to just run, either leaving the low monthly contribution as it is or stopping it knowing that the fund is generating monthly contributions for you. The fund my dad started, I capped the monthly contribution after a number of years at R200/month, the fund at that stage was contributing 54 xR200 payments a year in the form of interest and dividends.
I am proud to say that 3 years ago I retired and the funds I have grown pay me a very comfortable pension.
You can start an educational fund when your children are born and never worry about huge school/university fees. Tell them about it at an early age so that they become interested in their own fund, and they gain the knowledge of wealth, ie how to invest grow and keep it that is investment wealth.
Points to remember:
1. Never draw on your funds regard them as policies. Untouchable for now.
2. There are people who need the investment houses, that’s what they are there for so if you feel you may be tempted, (the boat or bike) lock your funds away in one of them.
3. Pay as much as you can into your funds, it is easier the earlier you start but run hard with them, it will pay off.
4. When the unit price drops it is no cause for alarm, it is then that the rand averaging effect comes into play. Units are cheaper so your buck buys more units at a cheaper price.
5. No agents commission, just the fee charged by the fund way below the commission charged by the Mutuals etc.
6. Just start!!! As early as possible.
7. Sometimes it is painful but with any pain your become used to it and you don’t feel it. Much like being married…………just jokes!!!!!

I agree on the points raised.

Re Point 5.
Most Mutuals in ZA don’t charge commission or up front fees if you invest directly. It is choice to go via a financial planner who could get up to 3.5% of YOUR cash invested and take an annual advice fee for perhaps doing nothing.

“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.”

When trying to prove the value of investing it is important to give the time frame otherwise the figures mean nothing.

End of comments.

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