In celebration of Women’s Day, I thought I would put down 10 investment tips I wish I had been given when I turned 23 years old and first started working.
1. Never depend on a man for your financial well-being
Being financially independent matters a lot in today’s world of relationship uncertainty. To reach that goal you need to start saving early and arm yourself with some financial knowledge.
2. Save for specific financial goals
Having enough money to educate your children, saving up for a rainy day or being able to buy a flat are more meaningful than outperforming the competition. Segment your savings into pots and never be tempted to dip into them.
3. Start saving early in life
My rule of thumb has been to save 20% of my monthly income from the first day I started working. I trained myself to think about my income as being 80% of what I was actually earning. Out of sight, out of mind.
4. Recognise that you might have to help support your parents in their old age
Given that life expectancy has risen, this may be more years than you have planned for. Prepare early and put money aside that you will not resent spending on them in their old age.
5. Never be embarrassed or intimidated into making a financial decision
Before seeking financial advice, arm yourself with knowledge of investment jargon and taxes.
A little bit of education via the internet can do wonders for your self-confidence and your financial well-being. Have a goal in mind and do not be dissuaded from what you want to achieve.
6. Management fees, time and performance are the three most important determinants of financial success
Achievement of your financial goals is dependent on three factors: what returns you earn, how long you save for and what you pay in fees. All three can be managed.
Returns are not determined by whether you invest with Coronation or Allan Gray but are largely determined by what you invest in.
Do not be scared to invest in unit trusts with high equity exposure and international diversification - "growth" assets. Even if equity prices are volatile, equities offer the best opportunity to achieve the highest returns. What fees you pay can substantially detract from overall performance.
According to National Treasury’s research, a 1.5% per annum reduction in fees means you will retire with a pot 60% fuller after 40 years of saving. The longer you save, the greater your returns. That growth is exponential because of the power of compound interest – return earned on top of previously earned return.
7. Chasing outperformance through specific asset managers is a mug’s game
Everyone is tempted to switch investments between different asset managers. Don’t. Choose a plain multi-asset balanced unit trust with maximum equity and international exposure and stick with it unless something goes very wrong.
A lot of money has been lost chasing the latest "hot" asset manager in town. Chances are that the winners of yesterday are the losers of tomorrow. Unfortunately, performance is cyclical – there is a reason regulators insist on the disclosure in all marketing materials. "Past performance is NO indication of future performance."
8. Having children costs a lot
I wish I had known that if I could save R30 000 into a tax-free savings account invested in equities for the first three years of my child’s life I would be able to pay for their university education. Such is the power of compound interest.
If you want to have children in the future, now is a good time to start your financial planning.
9. Travel as much as your pocket allows
Happiness studies prove that experiences, and not things, bring long-lasting happiness, and I can attest to that. And if your budget is tight - think local. We happen to live in one of the most beautiful and magical countries in the world - take advantage of it.
10. Life is too short not to spoil yourself occasionally
It is all right to occasionally blow some of your monthly budget on an indulgence. For some people, a handbag is like chocolate: the more you deny yourself, the more you are likely to gorge. So spoil yourself – in moderation.
This article was originally published on Sygnia's website.
*Magda Wierzycka is the CEO of Sygnia Asset Management.
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