A good way to start investing
by Andrew Smith on 16/01/07 at 10:19 pm
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If you work for yourself, chances are you’re not investing much. You’re not part of a big company pension fund that happens automatically, and it’s too easy to justify putting off any type of long-term savings – your business is about to take off and if you make it through this patch you’ll have money to save; your bond is a good enough form of investment; you love work and don’t need to ever retire. Sound familiar?
I had another excuse to add to the list: I resent the fees that the big Retirement Fund and Unit Trust companies take (have you seen the size of the Old Mutual building in Pinelands, Cape Town? They used your nest egg to build that!).
Last year I found a viable alternative in Satrix. Think of it as a type of Unit Trust made up of the 40 biggest companies in South Africa. You pay a lump sum or monthly debit and effectively buy a few shares in those companies. Here is a snippet from their site:
The major companies on the JSE included in the Top 40 index account for 95% of the trading the JSE. By investing in this index you are closely duplicating the performance of the entire market. Over the past number of years, the JSE has provided very good performance. For instance, over the last 30 years, the average annual return of the JSE has been 21,6%; over 20 years 17,7%; and 14,9% over ten years. All of these performances are comfortably ahead of inflation. For investors looking to generate capital growth on their savings over extended periods of time, the JSE has, in the past, provided an outstanding record of long-term growth.
The costs amount to 1% per year, which is well below the typical Unit Trust, and the ironic thing is that the Satrix 40 usually outperforms just about every Unit Trust available!
The reason I think this is a good idea for South African business owners (and other non-investing types) is that you can sign up right now. I know pension funds offer better tax savings, but let’s be honest – are you going to get a pension fund this week? At least with Satrix you can make a start by following these easy steps:
1) Vist the Satrix site (www.satrix.co.za) and read a bit. Don’t overdo this part, otherwise you might get distracted.
2) Download the New Business Application form (click here to get to it directly). There are some painful FICA bits and certified copies of various things, but nothing you can’t tackle with an hour or two of time and a trip to a post office or police station.
3) Choose the minimum debit order amount of R300 per month, with a 10% annual increase. You need to start somewhere, and it’s much easier to increase when you’ve got something going.
4) Fax or post the forms.
Follow these steps to a guaranteed warm, fuzzy feeling that you’ve done something good about your financial future.
(Disclaimer – I’m not a certified financial advisor, so you’re not really allowed to read this post. Forget all of it.)
Andrew Smith is the pedantic systems guy behind Live Alchemy, a SA e-commerce company. Andrew writes for Ideate in an attempt to make the world a more efficient place. View more articles by Andrew Smith.
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