Johannesburg –When it comes to investing in stocks, there
are a few things you need to get right before deploying your hard-earned money
to the markets.
You need to start with understanding the basics. This
involves differentiating between investing and saving, say experts.
It’s important to make sure you are living within your means,
said CFA and independent ETF strategist and advisor, Nerina Visser. “You can’t
invest if you are not doing it with spare capacity. You need to ensure you don’t
spend more than you earn.”
Visser highlighted that the risk taken should match the time
horizon of the goal.
Saving involves building up the capacity to spend on big
ticket items which falls outside one’s month-to-month responsibilities,
explained Visser. It is done at a low risk over a short period. Examples include
saving for your child’s school fees the following year.
Investment involves building up an asset base that you don’t
intend to use within the near term. Investments are long-term focused and not
concerned with the volatility of markets in the short-term.
READ: Why more women are investing in stocks
People should also be proactive in learning and acquiring
more knowledge about their investments. “There is so much information available
free of charge on the internet,” she said. “There is no excuse to be oblivious
of what’s going on. Empower yourself to make informed decisions.”
Visser added that there is a misconception that you have to
be good at maths to manage your investments. This perceptual link should be
broken. “People must learn to think of the investment market without the preconceived
idea of maths as a filter in between, then it would be less intimidating.”
Christelle Louw, advisory partner at Citadel added that one
should start early and invest in growth portfolios including shares for high
growth. “Volatility is not your enemy but rather inflation is,” she said.
Get rid of debt and ensure you don't use your savings to fund lifestyle and family expenses. Start by accumulating funds in cash and shares or growth unit trusts or endowments and retirement annuities.
"Make sure you know what you need to save to be financially independent. You need to have a goal to ensure you plan your savings," she said. “Make some time to look at your investments, it makes it
easier if you have a trusted financial advisor.” Read Fin24's top stories trending on Twitter: