In­vest­ment port­fo­lio

Finweek English Edition - - INVESTMENT -

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.

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