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.
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