Saving and Investing

Advice for a Young Investor

Hi,

Im a female of 22 years of age.

I have been investing about R350 every month with Old Mutual for a year now.

This year I have also invested with Liberty Life with R500 every month.

I have just started with the retirement plan of R420 every month.

I have a credit card with Absa Bank,of which I got this year,and I pay R38 a month for it.

I just wanted to find out am I going the right direction.

I don't have any assets in my name.

My gross salary is R8000 a month.

I wanted to buy or invest in a house, but my salary is too little.

How do I go about it?

Sizakele

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Investing

You're doing very well as far as the percentage of your income you are investing - almost 16%.

I am not familiar with investment products offered by either Old Mutal or Liberty Life in South Africa. What you want to do is look for mutual funds or exchange traded stocks that have low or no-loads - the cost of buying - and low management fees.

Then you want to look at historic rates of return of your investments compared to a standard rate of return for the South African stock market. Look for investments that either meet or beat that standard.

You should be able to find all this information in the business section of local major newspapers.

If you are not locked into some kind of contractual relationship with Old Mutual and Liberty Life and if you will not have to pay penalties to switch investments, you can shop around if either of these accounts are under performing South African norms.

So unless you are in really poorly performing or very expensive investment funds, you are definitely headed in right direction. If you continue investing this way for life, you will amass millions through compound growth.

Read Get Rich Slowly for more information.

Cost of Credit

Are you able to get no cost credit cards? If so, trade your Absa card in for one of those. I believe you have American Express down there, but they might price their offerings differently than they do in the states.

You want to manage your affairs in such a way that you minimize the cost of credit.

Legal Issues

I don't understand why you say you don't have assets in your name. In whose name is all the money that you are investing?

Again, I don't know how things are done in South Africa, so you should consult with a lawyer if there is any doubt the money is yours to claim whenever you want to.

Buying a House

As far as a house is concerned, whether you can afford one depends on how much they cost, if mortgages are available (and how much they cost) and whether the long term trend is for housing prices to increase.

It is not bad to borrow to buy an appreciating asset, while it is foolish to do so for a depreciating one. So it might not be bad to use some of your savings as a down payment for a home if you expect the home will be worth more in the future.

It might be best if you subscribe to local financial newspapers and magazines for a while to educate yourself more thoroughly on financial matters in your country. Then you will be in a better position to know how to proceed with your financial planning.

I hope this helps.

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