The New Year is just around t he cor ner a nd with t hat comes New Year resolutions, those late-night promises you make to yourself t hat are t y pical l y abandoned by the second sunrise of the New Year. So this year why not make a real resolution, one t hat will have a l ong-term i mpact on your l i fe and which will be easy to honour – well easier than q quitting g drinking or going to the gym thr three times a week?
Star t an i nvestmen nvestment portfolio, start saving and an investing for your future – it’s easier than you thin think and th the rewards w will be s i g ni f icant.
The f i rst challenge is always that we don’t have enough money to invest, and that’s looking at it the wrong way. We say we don’t earn enough when the truth is we actually spend too much. So get in control of your spending and get yourself to the point where you spend less than you earn.
Regardless of what you earn this is 100% possible, sure it may mean giving up on some of your perks, but it is simple – if you can’t afford it then you can’t afford it.
The problem is we spend and then save which, in truth, ends up being that you have no money left to save at the end of the month. Rather turn it around and save then spend. Set a debit order every month that goes off the day your salary arrives in your bank account and you won’t even notice it.
With your finances under control you can now start building an investment portfolio, and at f irst blush this looks to be a daunting task, so here are some simple rules to remember:
Keep it simple, sure we can complicate investing to the point where it hurts our brain, but we can also keep it very simple and still reap the rewards of an investment portfolio. The second rule is about managing risk, another phrase that seems complicated but is actually a simple process.
We manage r i sk by diversif y i ng across stocks and sectors and by buying winners not losers. Sure that loser may have a sudden and dramatic turnaround that propels them up the charts – but as a rule winners keep on winning while losers slink away to never be seen again.
So how do we keep it simple and keep the risk down? With exchangetraded funds (ETFs). There is no better place to start an investment portfolio, the Satrix40 gives you exposure to the 40 largest stocks on the JSE comprising all the major sectors with global and local companies that are proven winners in their space. Further, ETFs are cost effective and can be brought on a monthly debit order from as little as R300.
R300 a month may not seem l i ke much, but it is a start and starting is always the most important part of the process. Over time the R300 a month will add up and we can increase the monthly contribution as our f inances improve and we can also add lump sums to the investment along the way.
By sta r t i ng now, one day i n t he future you’ll suddenly have a real investment portfolio that has value and the ability to change your life – but f irst you have to start. Simon Brown is a Finweek contributor and heads justonelap.com, a free resource of f inancial information and investment education.