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Five common myths that hold you back from investing

You don’t need to compromise your quality of life to become an investor.
There are financial products that make it easier to invest and will help you reach your financial goal. Picture: Shutterstock

“Investing is only a rich man’s game” or “I’m not smart enough” are just some of the reasons used by South Africans to explain why they don’t invest. These misconceptions can stop you from reaching your financial goals and need to be debunked.

In a nutshell, the five myths sound something like this:

1. ‘I can’t invest while living my best life’

Many people believe they won’t be able to maintain their current lifestyle while also investing. This fear of having to surrender the fun things in life is particularly strong when there are exciting and expensive events coming up, such as a wedding or a dream holiday.

The truth is that you don’t need to compromise your quality of life to become an investor. It’s possible to invest as you spend. There is an easy option for people who would like to become an investor. We have developed a transactional account that enables you to select an amount between 5% and 15% of every purchase you make. It’s a ‘swipe and invest’ account that puts the invest portion into an interest-bearing unit trust account in your name. Instant investing.

2. ‘I don’t know how to invest’

Financial language can be confusing, and many South Africans assume you need a lot of financial knowledge and expertise to start investing. The truth is that there are investment products designed specifically to keep things simple and easy to manage. Making use of financial tools will also help you understand investing without the confusing jargon. 

3. ‘I don’t have the discipline to invest’

Putting money into a monthly investment usually takes discipline if you have not committed to a monthly debit order. But the good news is that some investments do the work for you. The example of the transactional account mentioned earlier combines a spending and savings functionality so that every time you swipe your card, you automatically invest a set amount. This works really well for anyone who battles with the discipline of saving.  

4. ‘I can’t afford to invest’

Everyone knows that the wise thing to do with spare money is to first pay off your debt and then to invest. However, in these tough economic times, many South Africans are feeling the pinch and feel they can’t afford to invest. This is where “forced” or “semi-automatic” savings or investments can be very beneficial, as it enables us to accumulate savings while we go about our daily lives. Money grows through compound interest, so the sooner you start, the more you will have in the end. Do some research into the benefits, fees and charges of the various options available to find the investment vehicle that suits your needs best.

5. ‘I don’t have 32 days to wait to access my investment’

The terms and conditions of savings accounts vary, so it’s important to establish which terms are most suited to your needs. For example, a 32-day call account has many advantages, but it can restrict your access to your funds. If quick-and-easy access is important to you, choose an investment account that allows you to make withdrawals, as and when you need them.

Shirley Smith is chief operating officer at Old Mutual Finance.

COMMENTS   9

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let me guess – the author works for a “wealth advisor”. yup – got it in one. so you are advising people who are struggling with day-to-day living expenses to invest in a market that at best is highly skewed towards so-called “rand hedges” – like Steinhoff and the reit’s. if you want to invest – start with tax free bank accounts

You hit the nail on the head. Everytime they want to support a financial advisor they don’t let you rebuff their comments. This website is designed to sell products!!!!!

Most of the TFSAs still give you a limited choice of funds so you still get exposed to the skewed market.

Robertinsydney you are a sad, sad fellow indeed. I have yet to see any constructive comments from you. This article has valid points and to refute this shows your ignorance and poor character.

No such thing as a tax free bank account.

Saving is not Investing.
Simply because its coined investment does not necessarily mean it’s investment as demostrated by the author.
The title of the article reffers to Investment and the content encourages savings.

Five common sense rules for investing:

1. Invest directly Compared to investing via a fund or manager you will save compound 3-4% per year or otherwise end up with 2,5 times more money after 30 years.

2. Invest directly in a dozen companies whose products/services you admire but that are not superhyped / controversial, ideally 11 of them overseas. Why a dozen? It is hard to pay attention to more than that. Rotate two shares out with two better ones every year or so. For the rest never sell.

3. If you cannot invest directly, buy the biggesS&P500 ETF in the US directly. It is a fund but their fees are less than a tenth of a percent. No intermediary required.

4. Do not borrow money to invest in shares and generally first pay off ½ of your mortgage before going big in equities.

5. Make three cheaper decisions a decade and invest that money. Yes you can own a car for 7 years instead of 3.5 years. Yes you can own a GL instead of a GLSe. Suffering through one upgrade cycle for two cars probably boosts a typical family about R5m in 20 years.

Far better to be the most financially comfortable in the room from 35 till you die than being the coolest 30y old for a bit

First rule. Stay away from Old Mutual. What they conveniently forget to tell you is that real growth might be 4-5%, while theirs total fees will be 3%, leaving you a mere 1-2% actual growth. Yes people, more than half your profit enjoyed by your expert advisor.

My advise is to invest in ETF’s via the EasyEquities platform. Either your Tax Free Savings Account (TFSA) or your usual equities account. This platform has a TFSA, RSA equities and USA equities account. I am currently employed so I dont have time for research in the markets, so I only invest in ETF’s (Exchange traded funds). The ETF fund managers controls the fund for a small fee usually 1% or smaller and EasyEquities takes 0.65% commission. You do all the investing yourself. ETF’s is a save investment as to equities because they are diversified (more equities exposure to make the risk profile lower). The dividends also cause the compounded effect. Just read up on the particular ETF you want to invest in, as they all target difirent markets. I have 5 different ETF’s for 1.5 years now, and my investment growth is more than the interest rates of banks (savings accounts).

I suggest taking a look at the ETF’s, save and not that much research. You can also start real small. I started with a monthly deposit of R 100.00.

End of comments.

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