The ultimate savings & investment vehicle!

Today I got a call from a journalist asking a few questions about what a beginner investor should do if they want to start investing…I think that they were looking for “tips and tricks” about which funds or shares to choose…here was my reply.

The first bit of advice I would give them is to consult a Certified Financial Planner®. It will cost them but could well prove to be the best investment they make. At the very least, they need help identifying their savings and investment goals. Are they short, medium or long term? They are “beginner” investors after all.

My 2nd piece of advice is to stay away from insurance companies- don’t ever invest via one of them. They are expensive, inflexible, opaque with respect to fees and returns and there are penalties when you change your premium/mind – and you will need to change your premium because life happens!

Once they know why they are saving/investing then there is no reason that they cant do the rest on their own…and my advice is to use unit trusts.

Why unit trusts? I think that they are the ultimate savings and investment vehicles because they are:

  • Accessible – you can invest from as little as R50 per month (and unlike many of the insurance products with low initial investment amounts, you wont pay 5-15% of premium each time you invest)!
  • Diversified – for R50 you can get exposure to all of the shares on the JSE and for R200 pm you can own the top 2000 shares in the world.
  • Cheap – in most instances there are no upfront admin fees and there are more than a few passive (tracker) funds with annual fees that are as low as 0.2% pa.
  • Flexible – you can stop, restart, increase or decrease the premium without ever incurring penalties!
  • Transparent – you can see the underlying investments and you can see all of the charges
  • Tax efficient – any time a manager buys/sells shares you will not be subject to any capital gains tax. This only comes when you sell one day.
  • Come in a variety of flavours – specialist equity to money market and you can get a tax-free account as well.
  • There is a whole layer of legislative protection – you own units in a trust fund and this is highly regulated!

I was then asked for my 2nd and 3rd choice investments…my answer was “unit trusts and unit trusts”.

Yes, I am a huge fan of unit trusts and will remain so until someone comes up with a better idea.


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