Johannesburg, 25 August 2021: The sure way to prepare for a future of unknowns and uncertainties, is to manage your finances in such a way that you have the financial flexibility to react and adapt to changing conditions. This was the view of several speakers at the #JSESheInvests virtual conference organised by the Johannesburg Stock Exchange (JSE) that provided almost 500 participants with empowering information on how to build financial resilience through investing.
For most people who are not sure where to start investing, Exchange Traded Funds (ETFs) that are listed on the JSE and also regulated by the Financial Sector Conduct Authority is a good starting point. There are 84 ETFs listed on the JSE with a total market capitalisation of over R114 billion.
According to Nerina Visser, ETF Strategist and Advisor and Chairperson of the Association of Savings and Investments in South Africa, before starting your investment journey, it is important to assess your current financial situation, define and set goals, determine your risk tolerance and develop an investment strategy. Visser likened ETFs to a hamper of goodies wrapped in cellophane where there is transparency of the basket of equities you are investing in.
“There is a lot of information out there as well as many units trusts and ETFs to select from. So, avoid getting stuck in taking the first step because of analysis paralysis. The best way to kick off your investment journey is with a domestic ETF that tracks an index until you build a position. The rest you will learn along the way,” Visser said.
Moreover, investing for the long term includes embracing inherent risks of the ETF value going up and down. “That is what makes above inflation interest possible,” she said.
JSE’s Chief Operating Officer Itumeleng Monale said setting financial goals with a specific outcome in mind was paramount. “It is equally important to invest in yourself and delay gratification for as long as possible,” she added.
Mapola Makhu, author, personal finance coach, public speaker, columnist, and entrepreneur said that to achieve financial progress required sacrifice, being definitive of the goals to be achieved and showing up. To start, it was important to look at the big picture and calculate your net worth to determine if you are on the right path and to know where your money is going. She emphasised the need for budgeting.
“Budgeting is telling your money where to go instead of wondering where it went,” she explained, adding that a great start would be following the basic rule of allocating your salary according to the 50-30-20 principle where 50% is to cover your needs, 30% for wants, and the remaining 20% dedicated to savings."
Providing practical steps on how to be ready for an uncertain future, author and finance journalist Maya Fisher-French said the Covid-19 pandemic has made it possible for people to have multiple income streams either from their side hustle or a second job. “Those that are adaptable have survived the Covid-19 financial crisis. This is why It is important to prepare and embrace uncertainty by planning for the unexpected,” Fisher-French added.
Providing some guidelines for financial planning, she urged that #JSESheInvests participants consider:
- Protecting themselves against financial calamity by having the right insurance such as life insurance to protect their families or future income, and medical cover such as a hospital plan or medical insurance. She cautioned participants not to buy a car if they can’t afford to pay the insurance;
- Investing for the long-term and taking advantage of compound interest. For example, when you have a lump sum payout of R100 000 at age 30, it may be better to invest it for the long term. By age 65 that R100 000 would have grown to R3,2 million versus starting at age 37 with the same R100 000 where it would only grow to R1,6 million by age 65 – meaning you would have “lost” R1,6 million.
- Avoid the car debt trap of long-term repayment commitments.
JSE CEO, Leila Fourie, said the JSE launched She Invests in 2018 with the goal to promote and support the investment needs of women in South Africa. “Whether you are just beginning your investment journey, or if you are looking for your next step to grow and expand your portfolio, #JSESheInvests has a little something for everyone.,” she concluded.
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