The sooner you start investing the better. Before I go into the details of how to do it, I want to first show you the value of WHY to do it – and stick to it!
As you can see, if you start investing R1,000 a month at a mere 9% growth rate a year till you are 55, you will have a sum of R1.83 million.
If you start at 30 years old, you will need to invest R1,632 per month to get to the amount. And by the time you’re 40, you will need to invest R4,838 per month to get to the same amount by the time you are 55.
What’s more, if you start at 25, you will only need to invest R360,000 in your lifetime to get to R1.83 million by 55.
If you start at 40 years old, you will need to invest R870,847 to get to the same sum!
In short, there is no better time to get started than right now!
So how do you get started right now?
My first recommendation to you is to take advantage of Tax Free Savings Accounts (TFSA).
On a TFSA you won’t have to pay any taxes:
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No Securities transfer tax – you will usually pay 0.2% of the value of the shares you buy as STT.
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No Capital Gains Tax – If you invest for the long run you usually need to pay tax of up to 13.33% on the money you make.
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No dividend withholding tax – You need to pay government 15% of every dividend you get; now you no longer need to…
That means, all the growth you get is yours – nothing goes to the government.
What’s more, companies like Easy Equities can offer you baskets of funds to invest in for your tax-free savings account. You can set up a debit order, to make your payments recurring, and start with amounts as little as R250 per month!
My second recommendation is that you look at individual shares.
An easy way to start an individual share portfolio – with the fastest growing shares on the JSE
Why I like Easy Equities is that the broker allows you to buy any amount of shares, with no minimum brokerage.
You can buy only a single share valued at R1 and pay 0.25% brokerage on that.
But that’s a bit silly really, if the share you bought doubled you’d only make R1.
But if you’ve got R200 to spare each month that would be a great start to invest…
Or, let’s say you have R500 that you can save each month, that means you can invest R250 in two different shares each month.
In less than a year you’d sit with a portfolio valued at R6,000 excluding growth.
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Invest where the growth is…
I have a passion for investing in the JSE’s fastest growing sector, Small-Cap shares.
I know, I know, the small shares we invest in aren’t necessarily multi-year investments. In fact, most of them are bought and sold within a year.
But sticking to the portfolio in the long run pays off massively.
How Red Hot Penny Shares beat the market for the past seven years
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If you look at this chart you’ll see the outperformance of the Red Hot Penny Shares portfolio since 2010.
We’ve averaged 25.77% growth a year, compared to the JSE’s 12.72%. And in this time, we’ve beaten the market average 70% of the time, with not a single year of total negative returns.
So, typically what you’d do is invest say R500 a month into a TFSA portfolio.
Then take your remaining R500 and invest in one or two high returning small cap shares.
That way you have a safe and certain investment, but also a speculative, yet high returning one.
And, without putting your livelihood on the line, you get the opportunity to learn more about investing in individual shares!
Here’s to unleashing real value
Francois Joubert
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