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Diversification advice

A Fin24 user who wants to invest for the long term needs advice on different options. She writes:   

I am a student who works, and while I do not earn much I would like to start investing for long-term purposes. I would like to start out with buying small securities from Satrix (R1 000).

I would like to know that if I decide to invest more, what would be the best option: investing more on the plan I will choose e g  Satrix Divi, or is it best to spread out my investment?

Andrew Duvenage, CFP® and executive director at NFB, responds:

The concept that you mention is that of diversification. Diversification is the process of spreading investments so as to limit risk.

While diversification is an excellent concept, one needs to be careful not to over-diversify just for the sake of it.

A product like Satrix represents an investment in a range of underlying shares and thus provides the diversification that you seek.

We would suggest that if this is your preferred investment choice, you focus on building the capital value up over time, and as the investment grows you can consider looking at other alternatives.

 - 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.

Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.


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