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A Fin24 user says he wants to start saving now already eventhough he only has a relatively small amount of money available. He writes:
I am a 22 year old student, finishing my undergraduate studies within the next six months.
I currently have a relatively small amount of money available and I am looking to invest it.
I have been doing a lot of research and have spoken to many people, who know quite a lot about investing.
I want to invest my money at a relatively low or medium risk and hopefully see a dividend coming my way every now and again.
My big concern is not the little money which I currently have, but I want to start investing a cut of my salary every month when I start working soon.
I plan to start investing money as early as possible, because it may become hard to put money away monthly when a family has to be taken care of in later years.
I have been looking at investments such as Satrix shares, but I am still very unsure.
I would appreciate it if you could advise me regarding this matter.
Chris van Wyk of PSG Hermanus Portfolio Management and Stockbroking, responds:
You have indicated that you prefer an investment offering low to medium risk.
As a first step, determine (with the help of a good financial adviser) if this risk preference is suitable for your specific circumstances, investment needs and objectives.
In general, the longer the time-horizon of the investment, the more risk you can take on.
As a young person in your early twenties you have an investment horizon, which normally would suggest taking on exposure to growth assets such as listed shares and property.
Growth assets are in the higher risk category, but should offer good opportunities for capital growth over the long-term.
Exposure to growth assets will usually protect you over long periods against the risk of inflation eroding the purchasing power of your capital.
Risk
If one assumes that the risk appetite you’ve expressed (low to medium risk) is suitable for your circumstances, investing the bulk of your funds in Satrix might amount to taking on too much risk.
Satrix tracks a specific set of shares on the JSE, for example the Top 40, and is a high risk investment.
It is always advisable to diversify investment risk over different asset classes and, if funds are of a reasonable magnitude, to invest offshore.
For a relatively small lump-sum and/or recurring investment that should offer low to medium risk, a stable unit trust could be appropriate.
This type of unit trust typically offers exposure to fixed interest instruments (such as cash and bonds), but also include some exposure to growth assets.
The mandate of stable fund managers often allows the fund to invest up to 40% in shares.
These funds can also offer exposure to offshore assets, offering some protection against a depreciation of the rand.
If a young person really wants to benefit from the “magic” of compound interest the appropriate approach is indeed to start early, to commit funds regularly for additional investment and to raise the regular contribution to one’s portfolio every time your income increases.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
I am a 22 year old student, finishing my undergraduate studies within the next six months.
I currently have a relatively small amount of money available and I am looking to invest it.
I have been doing a lot of research and have spoken to many people, who know quite a lot about investing.
I want to invest my money at a relatively low or medium risk and hopefully see a dividend coming my way every now and again.
My big concern is not the little money which I currently have, but I want to start investing a cut of my salary every month when I start working soon.
I plan to start investing money as early as possible, because it may become hard to put money away monthly when a family has to be taken care of in later years.
I have been looking at investments such as Satrix shares, but I am still very unsure.
I would appreciate it if you could advise me regarding this matter.
Chris van Wyk of PSG Hermanus Portfolio Management and Stockbroking, responds:
You have indicated that you prefer an investment offering low to medium risk.
As a first step, determine (with the help of a good financial adviser) if this risk preference is suitable for your specific circumstances, investment needs and objectives.
In general, the longer the time-horizon of the investment, the more risk you can take on.
As a young person in your early twenties you have an investment horizon, which normally would suggest taking on exposure to growth assets such as listed shares and property.
Growth assets are in the higher risk category, but should offer good opportunities for capital growth over the long-term.
Exposure to growth assets will usually protect you over long periods against the risk of inflation eroding the purchasing power of your capital.
Risk
If one assumes that the risk appetite you’ve expressed (low to medium risk) is suitable for your circumstances, investing the bulk of your funds in Satrix might amount to taking on too much risk.
Satrix tracks a specific set of shares on the JSE, for example the Top 40, and is a high risk investment.
It is always advisable to diversify investment risk over different asset classes and, if funds are of a reasonable magnitude, to invest offshore.
For a relatively small lump-sum and/or recurring investment that should offer low to medium risk, a stable unit trust could be appropriate.
This type of unit trust typically offers exposure to fixed interest instruments (such as cash and bonds), but also include some exposure to growth assets.
The mandate of stable fund managers often allows the fund to invest up to 40% in shares.
These funds can also offer exposure to offshore assets, offering some protection against a depreciation of the rand.
If a young person really wants to benefit from the “magic” of compound interest the appropriate approach is indeed to start early, to commit funds regularly for additional investment and to raise the regular contribution to one’s portfolio every time your income increases.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
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