How to start investing with as little as R100

Published on 25th February, 2022 at 04:33 pm

Thought investing was only for men in suits? Think again. Find out why it is so important for your financial success, plus how to get your money in the market, even with just a little of it.

You could be missing out

When you start investing and, more importantly, stay invested, you have little to lose and everything to gain. This potential for growth is what makes investment such an important part of your financial plan, as Jaco van Schalkwyk, a Certified Financial Planner^® at Plan-B BlueStar, underwritten by Sanlam, explains: “Your expenses don’t cease when you stop working or if you experience a life-changing event such as being diagnosed with cancer or being injured in an accident. If you start thinking about how you can invest while you are earning, you put yourself in a better position to provide financial security to pay for these future expenses. The best way to provide financial safety and security is to invest in assets that will grow.”

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Besides planning for a time when you won’t be earning, it’s healthy to set your sights on the life you want to create for yourself and your family. Do you plan to have kids? Which school would you like them to attend? Perhaps you have the picture of your ideal house in your head, but need capital for the deposit to make it a reality. The benefits of compound interest shouldn’t be underestimated. “I cannot stress enough the value of compound interest when investing,” says Wayne Hutchinson, business principal and managing director at Berghshire Wealth BlueStar, also underwritten by Sanlam. “Investing is a patience game, and investing in the right vehicle to keep your funds growing above inflation is imperative,” he adds.

Experts share top tips for creating generational wealth, here.

Why should I care about inflation when investing?

It’s all good and well parking your money in an investment vehicle, but if the growth you gain on it gets wiped out by inflation, you may as well be storing that cash under your mattress. Van Schalkwyk explains why: “Inflation erodes your money’s purchasing power, so it’s critical to outperform it when investing. A good example of an asset that can do this is property, whose growth would be in line with inflation and therefore protect against that erosion of purchasing power.” Not only will the property itself achieve capital growth, but you could earn a second stream of income by renting it out while you own it.

Finding the right investment vehicle for you

You don’t need to start in the millions or even hundreds of thousands of rands to get into the investment game. Ask your financial planner about the below options to get started.

R100
Consider: unit trust

“A unit trust is a great vehicle with low admin costs and easy access,” says Hutchinson. You can invest from as little as R100 per month – investing something is better than nothing at all!

R500
Consider: equity fund

“Typically, the minimum investment amount would be a R500 contribution per month,” says van Schalkwyk. Equity funds primarily invest in stocks, so be prepared to take on the impact of any major stock market movements. This is an ideal option for at least a five-year investment horizon.

R1 000
Consider: a money market fund

What you’ll get from this investment is high liquidity (your money isn’t tied up) and a low level of risk. “Taking a look at the Sanlam Investment Management (SIM) Money Market Fund, the minimum contribution would be R1 000 per month,” says van Schalkwyk.

R5 000

Sanlam financial planners have access to the Easy Invest App, which is uniquely beneficial to their clients, as it allows them to invest in some vehicles at lower entry amounts than if they were to invest independently or on another platform. For example, say you wanted to invest a lump sum in an equity fund, but didn’t have the R10 000 minimum available. You could invest via the app with just R5 000.

R10 000

If you’ve saved up, you have some options. Consider investing your lump sum either in equity funds or, if partnering with a Sanlam financial planner, you could look at investing the R10 000 as a lump sum in a SIM Money Market Fund through the Easy Invest App.

New to investing?

These are some principles to take on board if you’re going to make a success of it:

Practise patience

As Hutchinson mentions, investing is a patience game. “Many of my clients think investing is a get-rich-quick scheme or that they will see huge yields in their first year,” he shares. “This is not to say this cannot happen, but you need time and risk management.”

Stick to authorised providers

On a related note, van Schalkwyk also cautions against adopting unrealistic expectations of returns, which can make you more vulnerable to dubious schemes. “Out of desperation, I’ve seen clients take huge risks, often falling prey to unlicensed people or businesses who claim to offer much higher (and unrealistic) returns,” he shares. “These unregistered investment schemes, offered by people who are not registered financial services providers, lead to investors losing all the money they invest.”

Don’t lock in losses

If the market takes a nosedive, this is not the time to withdraw your capital. In fact, it’s the time to buy shares while they’re affordably priced. “These are the times you need to invest!” says Hutchinson. “Buy low, and sell high.”

Pay your future self

If you treat investment contributions the way you do instalments on debts like car financing or your credit card, you’ll build a habit of consistently ‘paying’ your investments – and it’s all money you get to keep! “Clients tend to give up too quickly, or they tap into savings too regularly, reducing their compound interest,” shares Hutchinson. “Try to view your investments as debt: you must stay loyal to paying them!”

If you’re looking to build your capital before investing, try this savings tool to help you get there.

Leave the past in the past

The allure of investing is often a result of seeing potential for success based on unprecedented wins. The reality is: investing doesn’t run on entitlement, and if you invest purely driven by past wins, you are sure to be disappointed. “Investors often wrongly believe that they need to actively pursue the best investment,” says van Schalkwyk. “As a result, they regularly switch from a fund that has had a relatively lower return in the recent past, to a fund that has had a relatively higher return.” You may be surprised at the devastating impact this type of behaviour can have on your returns.

Read this to learn about trends that are set to shape investing in the year ahead.

The importance of holistic planning

Many people hesitate to invest because a large chunk of their take-home pay goes towards servicing debt, or they don’t have a basic pool of emergency funds in place to prepare for the unexpected. So, would it still be wise to invest? Both experts strongly recommend chatting to a qualified financial planner to undergo a needs analysis to ensure you can invest with peace of mind.

Take the first step to your financial growth by booking a meeting with a financial planner today, here.