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Investing on your own? Do your homework ...

Taking the option to go it alone with your investments takes some work.

The financial universe is huge and navigating your way through the options takes a lot of research and study before making an appropriate choice. You could choose investments that are actively managed by specialist investment managers or you could go the passive route investing in funds which offer the average of certain markets.

Unit Trusts – The active route

They are managed by fund managers along specific guidelines. So you can choose funds which align to your objectives. In South Africa alone there are over 900 to choose from and globally there are thousands more. Each fund provides a fact sheet which is a good resource to help you understand where and how the fund manager invests. It explains the risks associated with the expected returns providing past performances relative to their benchmarks.

You will need to carefully study this information to get a better appreciation of your investment. If you don’t have the time or inclination to do this work then perhaps a financial planner is the better route.

Exchange Traded Funds – The passive route

You may want to simplify your plan by investing in the average of certain markets. Exchange Traded Funds offer investments in various sectors and asset classes. For example, an index of the Top 40 shares on the JSE. You can invest in these quality shares and get the average of their returns without having to trade yourself. You simply invest an amount per month or a lump sum and you then track the performance of the 40 shares. The costs are very low ( around 1% per annum) compared to unit trusts ( 2,5%) and share portfolios ( 2%) and you can start with as little as R300 per month.

Where to go

To help you understand what you are doing, there is a lot of information on websites that offer these investments, such as, www.equinox.co.za and www.etfsa.co.za where you can invest in specific assets like gold and property. As a general rule, it’s time in the market that will produce your results, Shares are for the long term so don’t look for get rich quick results. Your wealth is created over time with the phenomenal effect of compounding.


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