New to investing? Here’s where to start
If you want to start investing, are new to the concept of investing, or you’re looking for different avenues to invest in, it can be overwhelming to know where to start and what to expect. Investing isn’t a one-size-fits all approach, but understanding the basics that should underpin your decision will make your investment journey easier and potentially more fruitful.
We’re here to help you start investing. Let’s look at some common questions about where to begin.
How much do I need to start investing?
The good news is that you can start your investment journey with pretty much any amount. There are plenty of options, but to know how much to invest, you should be asking, “What do I want to achieve with this investment?”
Knowing what you want to do with this money will help you choose an option to invest in and show how much you need to start.
- Investing for income to live off in the future? Then look at a retirement annuity and aim for at least 10%–15% of your income annually.
- Want to build towards a long-term objective, such as complementing your retirement buying a house or paying for an education? A tax-free savings account is a great first step, and you can start from as little as R250 and add to it as an when you want.*
- Want to build wealth and get returns? Property or managed investments might suit you better, and this could range anywhere from R10 000 to R10 million and more.
| However, don’t wait just because you don’t have a certain amount; start small and start now because small amounts of money can add up and you can grow your investments, mature the type of investments and grow your confidence along the way. |
How long should I invest for?
Now that you know what your goal is and what you want to invest in, you’ll have a clearer picture of how long it will take to get there. Think about how much you need and what your time horizon is. Being purposeful with your investments will help you be more efficient with your money.
Remember, the longer your money is tucked away, the more it has time to grow. Time in the market is more important than trying to time the market right, so the best time to start is right now to give your money as much time as possible.
| SHORT TERM 3 months - 3 years |
MEDIUM TERM 3-5 years |
LONG TERM 5+ years |
|---|---|---|
| Car, holiday, wedding, paying off debt | Deposit for a house, starting a family, being debt free, financial freedom | Retirement, education, hone ownership, financial independence |
What should I invest in?
The right investment solution will get you to your destination more quickly and easily. Go back to your goal: what is the right platform to kick-start it? Consider a variety of options, as well as what those options will cost you in fees and risk and whether the process suits you.
Educate yourself on what you’re putting your money in, who is managing it and whether you can access and afford it. Remember not to put all your eggs into one basket and make sure you’re dealing with authorised financial products that provide realistic outcomes. If it’s too good to be true, it probably is.
How much risk should I take?
That depends on how you feel about uncertainty and whether you can afford to lose any of the money you’re putting into an investment. Your risk tolerance and comfort level will help determine the type of investment strategy and/or solution.
All investments have a risk-reward ratio. Lower risk investments will give you stable but conservative returns, and you need to be in them for a longer term to maximise your benefits, whereas a higher risk investment can offer potentially higher rewards, but part of the package is volatility and the possibility of losing money.
Top tip: It can help having an expert in your corner to help you reach your goals. Keep in mind that depending on the type of investment, if it pays off, you may have to pay capital gains tax. A certified and reputable financial advisor can help you navigate the investment landscape and help you make tax-efficient financial decisions.
| Top tip: It can help having an expert in your corner to help you reach your goals. Keep in mind that depending on the type of investment, if it pays off, you may have to pay capital gains tax. A certified and reputable financial advisor can help you navigate the investment landscape and help you make tax-efficient financial decisions. |
*Up to R36 000 per year or R500 000 over your lifetime. Contributions exceeding the limit will incur tax penalties.
Disclaimer: This article is solely intended for information. It does not constitute financial or investment advice or recommendation. Speak to a financial advisor or registered financial professional before making any financial decision(s).