Top tips for investing in stocks

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.”