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QUESTION: I am still a student but have an interest in starting my own investment portfolio, particularly in South African equities. I have a couple of thousand rand saved. How do you suggest I go about this?
ANSWER: Dick During, wealth manager at PSG in Tyger Valley, agreed to give some guidelines:
“An investor needs to understand that an investment portfolio in equities is not a get rich quick scheme. The time horizon for an equity investment should not be shorter than 7 years.
“The risks of short-term investing, unrealistic expectations, and volatile global markets have clearly been evident during 2018. Your investment - with the JSE All-Share index taken as measure - would have yielded a negative return of around 9% over those 12 months.
“Investing in the South African equity market can be done in various ways. The most obvious would be to buy shares on the Johannesburg Stock Exchange. This option is not always plausible due to the pricing of most of the quality shares, as well as the costs involved.
“Your alternative would be to invest in a singular, or a basket of quality equity unit trust funds, now known as collective investment schemes (CIS). Through an investment in such a CIS, the investor get access to a larger selection of some of the quality shares available on the JSE.
“You can invest in a singular fund with a specific fund manager or, alternatively, have your investment managed by a group of fund managers. You will do this via investing in a fund-of-funds CIS, giving you access to a multiple of investment strategies within the equity market.
“The historic returns on an equity-based CIS has been approximately 9 to 10% per annum for the past 7 years ending 31 December 2018 (assuming you have been invested for that total period).
"This compares with interest rate-based returns of around 6.50% per annum and inflation of just more than 5% per annum over the same period.
“For more detailed assistance please contact a qualified financial advisor.”
