How to invest: South Africa Style Part 1

As promised, I have finally collected enough information to help people make informed investment decisions. And as this post is aimed at South Africans, it has been like dealing with Telkom, difficult.

I will cover the following topics in your educations:
1) What is investing?
2) Risks and Pitfalls
3) Investment options

Lets get started!

What is investing?
First of all it is not gambling. Yes, there is an element of risk, there ALWAYS is, even if you stuff your money into steel-lined mattress with a  bio-metric lock, your money will slowly evaporate. Let's look at the risks and pitfalls next.

Risks and Pitfalls
This is a big subject and I will break it down for easy digestion

• Inflation

The stealth tax, that destroys the value of your money. At the farcical 4.5% for 2019, your R1,000-00 at the beginning of 2019, will only buy you R957-00 worth of goods. After 5 years that same R1,000-00 will only you R802-00 worth of goods and after 10 years, R644-00 worth of goods!!!! Quite clearly stuffing R1,000-00 into an armoured mattress has the same effect as someone breaking into your house and helping themselves to your money, without the trauma of having to replace your locks. You cannot control this "cost"

There are various reasons for the rising prices, but what this means, is any investment you make will have to return MORE  than the inflation rate for you to increase the value of your money (and THAT is the objective of investing).

I will show you how to mitigate this pitfall.

Addendum:
The official 2019 4.5% inflation rate is LOW by historical standards, and from personal experience, the real inflation rate is closer to 10%.

• Investment Fees and Expenses

This is another "tax" on YOUR money, and has the same effect as inflation. The good news is YOU can control this expense.Let me run some examples:
R1,000-00 invested, with a Zero rate of return and a 2% annual expense ratio (you will see this expressed as TER, Total Expense Ratio, or ER, Expense Ratio) will cause your R1,000-00 to be worth R820-00.
A 1% ER will cause your R1,000-00 to be worth R905-00.

The above numbers do not sound to bad, however, I have not added in the effects of inflation. I will let you do that!!!!

EVERY investment option will have a cost attached to it. If you minimise the cost you will maximise your return. Zimples. I will demonstrate the effects later in this in another blog post.

• Scams

If it's too good to be true, it is a scam. Stick to registered companies, and you should be safe. Remember, there is no such thing as Get-Rich-Quick.

Next time: What can you invest in?