Who qualifies?
October 24, 2022
Taking Care
October 24, 2022
A sweet amount you can bank on
Moroko Modiba, Managing Director of Fatima Capital and author of The Wise Investor: The Beginners Guide to Making Money on the stock market clarifies the benefits of ETFs, over a revelatory glass of wine and a R150 game changer.
I received an unexpected phone call from my sister telling me she had bought two tickets for a big concert the coming weekend. She didn’t feel safe driving alone at night in a crowded place, so she offered me one ticket if I could drive us to the concert and back. It sounded like a fair deal, so I agreed.
When I went to pick her up on the day of the concert she looked stunning. She was wearing a new outfit, a new pair of shoes, hair and nails done and holding a bottle of wine for the road. We hadn’t seen each other for a while so we talked non-stop.
During our conversation I asked her how often she goes out, buys new clothes, does her hair and nails. Her answer was at least twice a month. I did some calculations in my head and realised she could actually afford to invest on the stock market. When I told her this, she was very surprised. Like many people, she had always thought she’d need a lot of money to invest on the market. When I said she could invest for as little as R150 per month through Exchange Traded Funds (ETFs), she nearly spilled her glass of wine on her new outfit.
“But what’s an ETF?” She needed more information. As the name indicates, an Exchange Traded Fund (ETF) is a fund or a basket of shares that can be traded(i.e. bought and sold) on the stock exchange like an individual share. They are diversified, affordable and most importantly, simple to understand. You don’t need to be a genius or the smartest person in the room to succeed in the market. You can simply invest your money in these funds and get better returns than 80% of the funds actively managed by professionals.
I started explaining how she could start her investment journey by following what we call the core investment strategy. Here, an investor uses these passive, low-cost and low- fee ETFs to build the foundation of a portfolio. ETFs would enable her to cheaply diversify her portfolio by giving her access to different companies, industries, countries and asset classes.
