Before seeking investment opportunities, take the first steps in generating lasting wealth.
While we’d all like to make small investments that yield large returns, when it comes to finances, there is no such thing as a quick fix. “The more risk you take, the more you can grow your money,” says Liberty Life Financial Adviser Onalenna Disipi. “There’s no easy way to generate wealth; you have to be able to invest long-term.” Disipi suggests practical steps to develop an effective savings and investment strategy.
1. Get into the habit of saving
According to Disipi, cultivating a savings behaviour is the basis of generating income. “Short-term debt is the killer of wealth creation,” she says. Before you start an investment portfolio, finance your short-term debt. “This kind of debt eats away at your opportunity to grow money,” says Disipi.
By starting small and working to resolve debts and save portions of your income, you are taking the first steps to financial security. “Make saving a habit,” says Disipi. “Ideally you should be saving 15% of your disposable income a month. Tie savings into your monthly budget.
2. Set financial goals
“Most people think it takes wealth to create wealth,” says Disipi. “This is not the case. Step out of that mentality. Start with a small amount of savings and grow that.” Then when you have some money saved, use it to make wise investments in line with your financial goals. “To grow wealth, you need discipline, defined goals and savings behaviour. It’s important to define your savings goal, as this gives you a clearer picture of how long you have to invest,” she continues.
“Once you have defined the time-frame of the investment you’d like to make, professionals can identify the right investment options for you. The longer you have, the more you can be exposed to shares, as over the long term it has been proven that these investments do grow.” Once your goal is defined, it will keep you motivated to achieve it and you can prioritise accordingly.
3. Make wise share investments
Not everyone is a financial guru. Once you have money saved, approach an appropriate financial adviser who will help you select the right portfolios, says Disipi.
In general, when it comes to selecting which shares to invest in, focus on the industries that provide for the basic needs of the population, as these will always be relevant, she advises. These include:
- Food industry, eg Pick n Pay.
- Pharmaceuticals, eg Clicks.
- Banking, eg Standard Bank.
- Telecommunications, eg Vodacom or MTN.