3 Tips If You're New To Investing

There is too much information stopping you from getting started investing your money. We ask a certified financial planner where to start.
Melissa Wentzel
2017-06-12
There are so many options available to the investing novice. A number of choices can be overwhelming and could delay said investor from making a decision (losing potential gains in the process). We chat to a certified financial planner about where to start.
Read More about Investing in Property Below

3 Simple Steps To Start Investing, Today

Your personal finances, along with most things in life, should be kept simple. That’s why we chatted to The Financial Coach’s Gregg Sneddon, a certified financial planner, about how to start investing, simply.

1. Get Advice

Many of us are tempted to try and find our way without a financial advisor. Not all advisors are created equal and you want to make sure a financial advisor has your best interests at heart. But Sneddon says the absolute number one thing a new investor should do is get advice.
“If they’re absolute beginners the first thing they should be doing is getting advice.”
He explains that it’s not about someone choosing a fund for you, but rather about strategy. Why are you choosing a fund; why are you saving, what are you doing this for? Why do you want to invest?
“If you’re investing for something in a year’s time, it’s a very different strategy to a situation if you’re saving for something in 20 years time. Get advice.”
He suggests finding somebody you can pay, who’s not going to just sell you a product, but who will provide advice that’s worth spending money on.

2. Buy Unit Trusts

We asked Sneddon to recommend three investment vehicles for the absolute beginner investor. His reply?
  1. Unit trusts.
  2. Unit trusts.
  3.  Unit trusts.
“You can almost not beat a unit trust investment,” he explains, noting that, personally, he wouldn’t invest via an insurance company. "Buy a unit trust, and then forget about it. Don’t fiddle, leave it alone."

3. Start Now…

“…Not tomorrow, start today.”  
 

Why Choose Unit Trusts?

The best way to describe a unit trust is a type of collective investment that holds assets like properties, securities, and cash, etc. The success of a unit trust depends on the company that manages it, but previous performance is freely available online in most cases. Sneddon has three reasons you should invest in unit trusts:
  1. A unit trust is flexible,
  2. It’s transparent,
  3. It’s cheap.
According to Sneddon, unit trusts are extremely accessible.
"You can get a unit trust for as little as R50 a month... But, the reality is, R50 is going to take you nowhere." "Buy a gold unit trust, you can buy a property unit trust, you can buy a bubblegum unit trust. You don’t need anything else, you don’t ned a private share portfolio. You certainly can’t buy a private share portfolio for R200 a month, but you can buy a unit trust that has a private share portfolio for R200 a month." Read More about Common Misconceptions of Investing Below

Got More Money To Invest?

Sneddon would recommend a unit trust to someone with more money to play around with as well. It’s so, so efficient. For R2 000 a month, you can buy every single share on the JSC. [Alternatively], for R2 600, you’ll get one Naspers share. That’s it. One share in Naspers. It’s crazy. Buy a unit trust. They are absolutely fantastic. For R2 000 a month, he says an investor can get a good tracker – or passive – fund. Within the unit trust there are different kinds: so you can use an active fund or you can use a passive fund. It's unlikely a beginner investor would know that, which is why he says, again, to get some advice.
"You don’t have to pay commissions and all that, just get some advice. You’re going to pay for the advice, but it will be money well spent," advises Sneddon.