Is buying shares through Easy Equities safe? Besides Easy Equities, what other platforms are available to encourage investors to invest in a cheaper way?
Easy Equities is an easy to use platform where you can buy equities, exchange-traded funds (ETFs) and exchange-traded notes (ETNs), as well as other baskets and bundles.
If the term ‘safe’ in your question means that it’s a legitimate and licensed platform, and the person running Easy Equities is not going take your money and buy themselves a Ferrari and post it on Instagram, then yes, Easy Equities is ‘safe’.
Easy Equities offers a plethora of equities, ETFs, baskets and bundles. It can be quite daunting to scroll through the various options available, and therein lies the additional risk of asset class allocation.
In terms of risk rankings from highest to lowest, first, it’s equities, then property (property fund returns might tell a different story), then bonds, with cash being the least risky. It can get even more technical with the equities you buy, whether they are large-cap, mid-cap or small-cap stocks, where the larger companies are generally less risky compared to smaller companies. With bonds, there are different investment grades that generate higher yields the riskier the asset.
Investing can become quite tricky and we then read an article like this and freeze and do nothing and leave the money in the bank (cash), and we are then subject to inflationary risk, where your returns less taxes and costs are lower than inflation, so you lose the future buying power of your capital.
The book A Random Walk Down Wall Street suggests monkeys throwing darts at a dartboard would do better than an investment fund manager. The approach suggested in the book would be to buy a low-cost index that generates a return at what the index generates. The problem with that now is that there are so many indices, or low-cost ETFs, that as a layperson it becomes hard to choose – and as the markets get more complex with Covid-19, politics, digitisation and other external factors, getting professional advice might help you navigate the increasingly complex environment.
So you have two options, in my opinion.
Firstly, read up on fundamental analysis, read the annual reports of the companies you want to invest in, and do an analysis on the funds you own, and see where their holdings are allocated. According to Modern Portfolio Theory, you want to achieve uncorrelated returns, and this would be through investing in different asset classes, geographic locations, and different industries to build a diversified investment portfolio.
Alternatively, you can find a professional who can assist you – my rule in my home is if it takes me more than 15 minutes to fix a gate motor, or pool pump, or anything I do not know much of, I call a professional, pay the fee, and get it fixed, as I know the value of my time.
A 5% loss based on throwing darts at a dartboard on your R1 000 portfolio is the cost of a Big Mac, but 5% on your R10 million portfolio is R500 000.
Other ‘safe’, low-cost funds, advisors and platforms include:
- Gray Capital
- Nedcore, and
Your local bank will also have an investment platform.