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How to start investing

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Disclaimer: this should not be taken as advice but seen merely a possible guideline/strategy to be researched further by yourself

 

We see a lot of questions on forums about how to start investing, what to invest in and it is almost always met by a miriad of answers. From hiding the money under your bed, to using your TFSA to save for a car to FOREX.

 

Truth is, before you invest even one cent there are a bunch of boring and possibly time consuming stuff you should take care of, and this is definitly not what most want to hear. Investing in shares and "playing the stock market" is the last thing on the list to do and it is a very broad subject within itself. Anyway, here are a few things you should consider doing:

 

1. First Pay of your bad debt. We're not talking cars or homeloans but rather credit cards, overdrafts and personal loans.

 

2. Then Get insurance. This includes stuff like income protection to make sure you still have a salary if you should lose the ability to work.

 

3. Build up an emergency fund. You should build up a large enough fund so that you can live of it and cover all your monthly expenses for 5-6 months. You can save this money in a 32 day account or something similar that gives you fairly easy access to it, but still gives you a reasonable interest rate (you want to try to keep up with inflation at the very least)

 

4. Now you can invest and at this point it is probably best to go see a financial advisor (make sure they are registered: http://www.fpi.co.za/FPI_Consumers/Find_A_Financial_Planner_Basic.aspx). You don't have to follow their advise but they do know a lot more about this stuff than most so it's worth meeting one regardless.

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With so many people in debt these days... it will take them almost a life time to get out of it with not enough time to start saving before they retire. Maybe that is why so many people are looking to generate a second income these days.

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If only most people realised that they don't need a Ford Ranger, BMW or GTi to drive around town. I mean we all like cars but the premium you pay on having the "top spec" model, the fuel, the insurance - it's a crazy amount of money. And the excuses are great: "I'm already paying R5000 pm on my car so it doesn't make a big difference if I buy a new one costing me R6000 pm."

 

If they do the inconveniant math (Patrick wrote a piece on this) you'll realise that every Rand you spend extra on that car is money that could've been saved and could've grown for retirement. They buy a car for R400k, factor in interest on the loan and are now at R600k and think that's the end of it. Think of the extra R100k you coul'dve invested if you bought a cheaper car and what amount you robbed yourself of if it had stayed invested until your retirement age (for some, 20-30 years).

 

Not that a prudish lifestyle is what I'm advocating, one must enjoy life after all :P

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I think the best would be to rush 1 through 3 so you can start with 4 as soon as possible so you can take advantage of the power of compounding.

 

For example, if you invest R1,000 and earn an average 10% return annually, your investment will grow to R1,100 after the first year. After the second year, you won’t just earn another R100 but R110, for a total of R1,210. And the third year you will earn R121 for a total value of R1,331.

 

On a small scale, this doesn’t seem like much, but assume you invest R1,000 per year for 30 years and average a conservative 8% return. Instead of having R30,000 in a checking account, you will have accumulated more than R132,000.

 

Compounding returns are critical to investors because they allow you to turn small principal contributions over a long period of time into large nest eggs. Keep in mind that Albert Einstein called compounding interest “the most powerful force in the universe.”

 

So in essence how to start investing rush till 4.

 

Maybe we should have some beginner course on how to invest similar to what we have going here:

https://www.platinumwealth.co.za/forum/Thread-Part-1-Wills-and-Testaments-101-Gather-information with the guide on how to create a will by creating a scenario for a dummy user.

 

With the likes of easyquities making it available to start out really small it would be ideal to create a tutorial for new comers perhaps bundle it up for a more diversified offering by including an Unit Trust from the likes of Sygnia, after reading what @Magda Wierzycka had to say I realized it’s time to move my unit trust across from my existing broker.

 

@Platinum Wealth perhaps you can contact easyequities and ask them to allocate a dummy account for you or a member willing to do this then you take screenshots and guide the user step by step through the process. Seems Sygnia is willing to engage on the forum so same to them ask them if they are willing to help mainly by demonstrating what the process would be to open an account and what sort of account access you will get and how the “dashboard” looks like and create some form of balanced scenario for the average joe who does not earn top 1% figures. I see 22seven being mentioned here on the forum perhaps that should be included if Sygnia can be synced up with 22Seven like easyequities can.

 

Perhaps the beginners guide should be focused around a core etf portfolio since the etf in itself would be more diversified and less prone to fluctuations compared to a single stocks portfolio the idea here being to get average joe in the right mindset since a lot about investing is a mindset as well and he has to be trained shown what swings can happen.

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Mr Yellen, not one for small requests ey.

 

I like the idea/suggestion, let me run my mind a bit over the coming days and see if I can create something. I will email EasyEquities and speak to Magda and see if they would make the time available to give some input more importantly I will see if they are willing as one of my biggest concerns would be to ensure the guide/tutorial/instruction are as fact checked as possible and would like to have the final product peer reviewed by them before we post it as to ensure integrity and the advice given is as accurate, sincere and up-to-date as possible.

 

I've read your post a few times over now and I'm starting to get some inspiration for how we can do this but I'll first discuss it with them as it all depends on their involvement and cooperation.

 

I will keep everyone updated.

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Mr Yellen,

 

I have spoken to EasyEquities and to Sygnia, they are on board so I will have a world of research in front of me, but I believe the end product will be something very unique and you will like it. Granted this will not be a "done in a week" thing, we are going to take our time to ensure this is as in depth as possible.

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Mr Yellen,

 

I have spoken to EasyEquities and to Sygnia, they are on board so I will have a world of research in front of me, but I believe the end product will be something very unique and you will like it. Granted this will not be a "done in a week" thing, we are going to take our time to ensure this is as in depth as possible.

 

That sounds pretty awesome. I had to dig deep to get all of this information and it took a couple of months of research. I'm 100% sure you will help A LOT of people with this

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Mr Yellen,

 

I have spoken to EasyEquities and to Sygnia, they are on board so I will have a world of research in front of me, but I believe the end product will be something very unique and you will like it. Granted this will not be a "done in a week" thing, we are going to take our time to ensure this is as in depth as possible.

 

That sounds pretty awesome. I had to dig deep to get all of this information and it took a couple of months of research. I'm 100% sure you will help A LOT of people with this

 

That at the end of the day is the goal. This platform as one purpose and that is to become the educational hub for South Africans interested in finance and the Average Joe, because one way we can make a major difference in the future of this country is by enabling more and more people to get into a position of knowledge where they can take control of their own finances.

 

Like you say this will take some deep digging, I am by no means a financial expert. I am a educator more than anything else so I will have a lot to learn and learn and learn and research, but I am determined to create this guide and with the help of EasyEquities and Magda just a message away I am confident that it would be something worth while to put out there once completed.

 

I will probably bounce a few questions of existing members here on the forum as well as part of the research. For example slightly unrelated but on the Wills thread that Mr Yellen pointed out one thing started to stand out to me and that is the POLL, that poll its a small demographic but even in this small community the results is still shocking seeing that the majority does not have a will in place.

 

That is the sort of things I want to address as well with the investing and savings aspect. Especially this thread (What do you use to manage your finances) and this thread (Budgeting) it touches on something that I also quickly realized not many South Africans are on top of their expenditures and just general "Where has my money gone" so something I want to address in this guide is sort of "The Fundamentals of Household finance" practical examples of how to track and save money how to know what money goes where and how to build up an emergency fund.

 

All in all, A lot of work ahead.

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Mr Yellen,

 

I have spoken to EasyEquities and to Sygnia, they are on board so I will have a world of research in front of me, but I believe the end product will be something very unique and you will like it. Granted this will not be a "done in a week" thing, we are going to take our time to ensure this is as in depth as possible.

 

That sounds pretty awesome. I had to dig deep to get all of this information and it took a couple of months of research. I'm 100% sure you will help A LOT of people with this

 

That at the end of the day is the goal. This platform as one purpose and that is to become the educational hub for South Africans interested in finance and the Average Joe, because one way we can make a major difference in the future of this country is by enabling more and more people to get into a position of knowledge where they can take control of their own finances.

 

Like you say this will take some deep digging, I am by no means a financial expert. I am a educator more than anything else so I will have a lot to learn and learn and learn and research, but I am determined to create this guide and with the help of EasyEquities and Magda just a message away I am confident that it would be something worth while to put out there once completed.

 

I will probably bounce a few questions of existing members here on the forum as well as part of the research. For example slightly unrelated but on the Wills thread that Mr Yellen pointed out one thing started to stand out to me and that is the POLL, that poll its a small demographic but even in this small community the results is still shocking seeing that the majority does not have a will in place.

 

That is the sort of things I want to address as well with the investing and savings aspect. Especially this thread (What do you use to manage your finances) and this thread (Budgeting) it touches on something that I also quickly realized not many South Africans are on top of their expenditures and just general "Where has my money gone" so something I want to address in this guide is sort of "The Fundamentals of Household finance" practical examples of how to track and save money how to know what money goes where and how to build up an emergency fund.

 

All in all, A lot of work ahead.

 

Hats off to you for doing the effort. 

I'll be willing to help where I can with questions, as I'm sure most members will, even though I'm also still learning a lot and consider myself a n00b :)

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Thanks so much for this PDF, I must have decided to look at trading and investing at the right time!

Quick question regarding the ETF's you suggest. I had deposited that R1k into my normal EasyEquities account, and not the TFSA one. Does this make a difference when buying those ETF's?

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Thanks so much for this PDF, I must have decided to look at trading and investing at the right time!

Quick question regarding the ETF's you suggest. I had deposited that R1k into my normal EasyEquities account, and not the TFSA one. Does this make a difference when buying those ETF's?

 

Not at all, costs should be the same as far as I am concerned.

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Not at all, costs should be the same as far as I am concerned.

 

Thank you. Just to clarify a bit further, so it will not matter me purchasing the ETF's via the EasyEquities account rather than the TFSA, regardless of costs? What would the point of the TFSA account be then? Only if you holding money in that account? Sorry for the ignorance.

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Thank you. Just to clarify a bit further, so it will not matter me purchasing the ETF's via the EasyEquities account rather than the TFSA, regardless of costs? What would the point of the TFSA account be then? Only if you holding money in that account? Sorry for the ignorance.

 

The purpose of the E-book was to get people to embrace the fact that the government is giving you the incentive to invest by making it TAX free.

 

So the difference between your EasyEquities TFSA vs normal EasyEquities account would be that in the TFSA your gains are tax free and your dividends are tax free. In the main account you will pay capital gains tax and dividend withholding tax.

 

So to put it more practical:

 

If Johny and Jane buys the exact same ETFs on the exact same time paying the exact same fees and share price. However Johny bought it inside his TFSA and Jane bought it in her regular account.

 

5 years from today the money Johny owns will be more than Jane, because Jane will have to pay all the associated taxes that Johny avoided in his Tax Free account.

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Ok, Thanks guys. I guess I was a bit confused about when you sell whether you can choose which account to use, but I guess it will use the account you bought from. I will deposit more into my TFSA account and rather do it properly from the start. Again thank you.

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Ok, Thanks guys. I guess I was a bit confused about when you sell whether you can choose which account to use, but I guess it will use the account you bought from. I will deposit more into my TFSA account and rather do it properly from the start. Again thank you.

If you do go TFSA make sure it is money you are saving for retirement (when you're 65 or something). You don't want to withdraw from it to buy a car etc.

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Hi Guys

 

I'm a newbie here. Been reading some of the posts. Nice work guys. Very informative.

Can somebody tell me how to invest in USD. i'm currently using ABSA Stockbrockers and IRESS for trading on the JSE.

But how do i trade currency ? Which is the best platform to do so?

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Hi Guys

 

I'm a newbie here. Been reading some of the posts. Nice work guys. Very informative.

Can somebody tell me how to invest in USD. i'm currently using ABSA Stockbrockers and IRESS for trading on the JSE.

But how do i trade currency ? Which is the best platform to do so?

 

Easiest (considering you already have an ABSA Stockbroker account) is to buy the NEWUSD ETN. Will effectively track the USD exchange rate with ZAR. You do not own USD though, when you cash out it becomes ZAR again. You are saving quite a bit on transfer costs etc.

 

If you want actual USD - open an FNB Global Account and transfer into it. Done.

 

To do actual/active forex trading though you may want to look at another solution which these are not.

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