Kick start your investing journey with four easy steps
Developing solid investment habits among South Africans is a vital step in improving our individual and national financial prospects. Now is a great time to spark conversation among young people about investing and the role it can play in cementing financially resilient futures.
Gielie de Swart head of Retail Distribution at Sanlam Investments, says, “When you are young it feels like there are years and years ahead of you to start investing. And with so much information out there, big financial words thrown around, and so many product options available, first time investing can become extremely overwhelming. But starting early really is the key to building wealth and setting yourself up for a safe and secure financial future!”
He said that the more familiar term ‘saving’ is focussed on the short-term, putting money away in a bank account or similar vehicle that doesn’t deliver strong returns. Investing, on the other hand, is when your money is used to buy assets that may grow over the long term. It is the process of actively growing your funds over the long-term to build wealth. And starting young is easily the best way to succeed!”
Here, De Swart provides four simple steps for young people to follow to become savvy investors:
Step 1: Pay off your ‘bad’ debt
Before you start investing, it’s important that you first pay off your so-called ‘bad’ debt, like credit cards and store accounts. This is particularly important for debt that has high-interest rates as it will cost you more than an investment is likely to earn. Something like a home loan doesn’t count as ‘bad’ debt because it’s funding an asset, which will hopefully grow in value over time.
Step 2: Do you have a ‘rainy day’ fund?
Once your debt is under control, you need to consider having a ‘rainy day’ fund. Also known as an emergency fund, this is the fund that will help you out when you most need some extra cash. This could be when you are in-between jobs or have an unexpected health expense.
It’s generally recommended that you save an amount equal to between three and six months’ worth of expenses. Put this money in an accessible account, such as a Sanlam unit trust fund, so you can get to the money when you need it.
Step 3: Pick a goal, target amount and time frame
Once you have your emergency fund set up, it’s time for you to invest. Decide what it is that you’d like to achieve (your goal). Would you like to top up your retirement investments or set money aside for something special?
Next, decide on your financial target – how much you’d like to have in your investment account. After that, you’ll need to be clear on how soon you’d like to achieve that goal. Would you like to access that money within the next year, the next five years or in 20 years? That’s an important decision to make, as your timeframe will influence how much risk you can take on. The good news is that there are many free calculators available to help you work that out.
Step 4: Choose your investment funds
The last step is to choose your investment funds. You can do this with the help of a financial adviser, or you can use an easy self-investing platform like Sanlam’s Smart Invest. It has been designed to help you make a unit trust investment that is right for your goal, time frame and risk appetite.
Ready to get started? All you need is R500/month to join 200 000 other Sanlam investors and start saving smartly towards your goal, today.