Investing in your 20s

DO YOUR HOMEWORK: BUDGET SAVINGS, THEN MANAGE INVESTMENTS

Don’t keep all your eggs in one basket.

complex company-, property- and asset investing.

Budhram says beginner investors should start with an option with more structure and safety. She suggests: companies to invest in. Then looking at its financials and understanding the business; asking if it’ll be around for the next 20 years; and getting help from a financial advisor.

When investing in individual stocks, he advises buying at least 10 to 20 stocks slowly over the next decade to diversify your investment portfolio.

Investing in individual stocks and shares is high-risk, and business performance is unpredictable. However, Redelinghuys says it’s better to take the risk while you’re in your 20s, when you have time to recover.

Budhram says how much you invest depends on how much you can afford. But your investment’s impact also depends on how long you invest for.

Returns

Capital investment is money put into structured investment vehicles like unit trusts, TFSA, RAs or ETFs or directly into your own share portfolio. Your money grows depending on investment returns (interest, dividends and the underlying investments’ capital appreciation), says Redelinghuys.

Then there are income investments. On retirement the capital you’ve built up has to be invested to generate a passive income, adds Budhram. If the stocks you buy and the money you invest in a business start working for you, they can cover your bills for the rest of your life.

Redelinghuys says shares return on average over 10% to 11% a year over 30 to 50 years. “Shares pay a dividend, so there’s cash flow that come from shares…. eventually you realise the annual account fee is paid with one share’s dividend.”

When checking out a company, look at its dividends return for an indication of how many shares to buy. Redelinghuys suggests doing fee comparisons between different product providers and service providers, picking one with the best service at the best price.