Investment in South Africa for Beginners

Initial entry into the world of investing may be intimidating, especially when confronted with all the business jargon and complexities… Ultimately, what you want to know is what the finest investing opportunities are for novices in South Africa. Right?

The good news is that investing does not have to be intimidating, especially if you grasp the fundamentals. Financial planning enables you to identify your short- and long-term financial objectives and develop a balanced strategy to help you achieve them. It is recommended to begin by reviewing your present financial situation, projected changes, and future objectives. Then, your investment plan can represent your investment risk tolerance and the objectives you are pursuing.

Whether you want to pay for your children’s education, purchase a new house, or prepare for retirement, the financial planning process can help you determine how much and over what time period you will need to invest to achieve each of your goals.

So, are you prepared to hop into the fascinating world of investing?

What Are Unit Trusts

A unit trust is a form of investment that pools your funds with those of other investors with similar investing goals. Depending on your demands, you can invest from three to seven years. It provides convenient and cheap access to financial markets to grow or protect your wealth. You have access to your funds anytime you require them. It is simple to purchase and sell, and you may invest more or withdraw your funds within a few days. If you hire a financial advisor to invest in unit trusts, there are normally investment management and financial adviser fees associated with unit trusts.

Let’s Talk ETFs

As of 2022, exchange-traded funds (ETFs) in South Africa had a market capitalization of R124 billion. Market ETFs include industry ETFs, stock ETFs, bond ETFs, currency ETFs, and commodities ETFs. ETFs are listed financial products that track the performance of a group or “umbrella” of Shares, Bonds, or Commodities. These are referred to as indexes. The FTSE/JSE Top 40 Index is an example of an index. An ETF can be purchased or sold similarly to a Common Share. ETFs save investors time and money by allowing them to invest in several asset classes through a single listed investment vehicle. These ETFs utilize a passive investment approach. 

Actively Managed ETFs (AMETFs) are likewise listed investment products, but they provide exposure to a portfolio that is actively managed through a discretionary investing approach. Due to the range of businesses or sectors in which South African ETFs invest, certain ETFs will always perform better than others. 

This was true even during the economic recession of 2008 and the Covid-19 epidemic. Knowing which ETFs to purchase and when is tough, but it is the difference between winners and losers. A highly volatile ETF, such as a currency ETF, is a fantastic alternative for speculative investors, but investing in a bond ETF is a smart long-term plan.

Easy Properties

So, you wish to invest in real estate but lack the necessary funds? However, EasyProperties has your back. With EasyProperties, you may invest the funds you have to gain exposure to the South African real estate market. Easyproperties invests in residential properties inside the limits of South Africa and has a propensity for purchasing many properties within the same sectional title block. The EasyEquities platform enables (regular) investors to purchase stocks, ETFs, cryptocurrencies (through EasyCrypto), retirement plans, and even real estate. Real estate is pricey. To make the asset class more accessible, EasyProperties permits the purchase of fractional shares of real estate companies. Consequently, the firm owns the properties. This means that you will own the properties jointly with several others. As you may be aware, EasyEquities uses fractional shares (CFDs). This allows consumers to purchase shares with the funds they have rather than requiring them to purchase an entire share.

Shares & Stocks

We have made an effort to comprehend our existing financial standing, which will assist us in making prudent judgments regarding our future investing objectives. As part of the process of wealth development, it is essential to comprehend why purchasing stocks is a good way to invest and expand one’s money. The purpose of stocks is to produce additional revenue for the future. Even the most cautious investors desire some amount of income creation from their portfolios. What does the return on investment in stocks look like? Investing in stocks generates two types of income: dividends and capital gains.

Simply put, capital growth or gains is the difference between the purchase price and the current value of a share. Therefore, if you purchased a share for R200 a year ago and its value has increased to R250 today, the capital growth would be evaluated at R50.

Dividends are how a firm compensates its shareholders or investors with a percentage of its revenues. Even if prosperous, not all firms pay dividends, which is crucial to keep in mind. They can opt to do a variety of things with the profit, including: 

• Reinvest it in their company

• Repaying debt

• Share some of these gains with their shareholders (i.e. dividends)

If they pay dividends, companies do so once or twice a year following the release of their annual or interim results. It is at the board of directors’ discretion to distribute dividends to shareholders and determine their amount.