2019 has been a tough year for South Africans. With companies announcing job cuts and tightening their belts on expenditure, most employees will not be granted the opportunity of a year-end bonus. However, should you be one of the fortunate to receive a thirteenth cheque, you should adopt the foresight to institute a sound financial investment plan.
Here are 5 popular investment ideas for you to consider:
Settle Your Outstanding Debt
Before you even think of investing your money, you need to settle your short-term accrued debt. This includes your credit card and various retail and or clothing accounts. Interest rates on these types of accounts are usually high, so once you’ve settled the balances due, you could save a substantial amount of money per month as you head into the new year.
Open a Tax-Free Savings Account
Ideal for long-term investment goals, tax-free savings accounts permit you to contribute a total of R33 000.00 (per tax year) towards a tax-free or investment account(s) with the interest earned tax free.
However, there is a lifetime contribution of R500 000,00 per individual before SARS implements penalties or levies.
Instituted by the National Treasury to strengthen savings among middle-income and lower-income South Africans, the likes of FNB, Nedbank and Capitec offer various simple tax-free products to choose from.
Open a Money Market Account
A money market account affords you the opportunity to invest short term with your bank in various formats, such as a seven-day account or a thirty-two-day account.
Easily accessible, this product is ideal for long-term goals or for an emergency fund for those unforeseen circumstances. Money market accounts are not exposed to market fluctuations. So, the interest earned on your savings will not be affected, despite the changing stock exchange and the property market. However, this option is not ideal for long-term investments such as retirement, as it will underperform against inflation in the long run.
Consider a Unit Trust
If you have a basic understanding of how an investment works, a unit trust may be something for you to investigate. Unit trusts gather money from various investors towards a pool of assets, bonds and property.
A unit trust offers individuals a wide range of assets to tap into which are specifically selected and managed by investment professionals. Divided into equal units, the prices of these units vary and are based on the value of all the investments which the fund oversees.
Some funds place focus on investing in company shares whilst other funds (such as the government) issue periodic interest payments. As a shareholder, you can choose to receive your distributions or to use these distributions to buy more units to widen your investment portfolio.
Invest in the Johannesburg Stock Exchange
Acclaimed as the best stock market in Africa, the Johannesburg Stock Exchange (JSE) has a track record for delivering sound returns for both investors and traders.
Investing in the JSE is easier than it looks – you can control your investment risk and you do not require a large amount to start.
The types of shares you choose to invest in largely depends on how much risk you are willing to take and your investment budget. There are a few JSE share options under R10,00 in price. These shares are recommended for new investors with a smaller amount of money to invest. However, buying the cheapest stocks won’t be worth your while due to the average cost of brokerage cancelling out any profits you accumulate. It is advised that a minimum investment amount of R5 000,00 is required.
For 2019, the JSE’s top 20 shares to invest in included Kumba Iron Ore Limited, Telkom SA SOC Ltd., Naspers Ltd., MTN Group Limited, Anglo American plc and, Capitec Bank Holdings Ltd., to name a few.
Whichever investment option interests you, do thorough research and, if necessary, seek the advice of a professional before making any final decisions. If done properly, you can build a sound investment portfolio for your future financial planning.