Building a sound savings and investment portfolio requires discipline and commitment to ensure that you meet your short and long-term financial goals, regardless of your age and life stage. Knowing where to save and invest is equally important in ensuring that you make the right financial decisions.
Palesa Moletsane, Head of Stockbroking and Portfolio Management at FNB Wealth and Investments says, “there are several savings and investments vehicles that one should consider. The trick is firstly defining your goals and doing adequate research about the right vehicles which aligns with your risk appetite and financial goals.”
Ilse Smuts, Business Development Head at FNB Retail Cash Investments, echoes this sentiment and believes that research coupled with the right kind of advice will help you make the right decision in your journey to achieving financial freedom. She adds that when planning, it’s important to balance between choosing vehicles for short and long-term goals to avoid tapping into debt to address financial emergencies.
Moletsane and Smuts, share some of the savings and investments vehicles that consumers must be aware of in their journey to building financial freedom:
- Exchange Traded Products (ETPs): ETPs comprise of Exchange Traded Funds (ETFs) and Exchange Traded Notes (ETNs). These instruments will give you an opportunity to participate in the performance of the listed entities, such as those listed on the JSE, or international exchanges without direct ownership of the share.
ETFs & ETNs offer flexibility in terms of how much you can contribute, and you can cash out at any time. However, the longer you keep invested, the better the returns. FNB has inward-listed ETNs, which track the performance of globally listed entities such as Nvidia and Amazon. These ETNs are listed on the JSE and one can invest as little as R10 in these ETNs.
- Unit Trusts: allows an investor to get exposure to different asset classes like cash, bonds, property and equities. This ensures that the investor gets maximum benefit during your desired investment with a single investment period. Investors can use this vehicle for short- and long-term goals.
- Tax Free Savings Account (TFSA): when using a TFSA both the capital appreciation and income are tax free, provided that a contribution of R36,000 per year is not exceeded or a maximum investment amount of R500,000 over the lifetime of the investment. There are options to save and invest in tax-free cash deposits, tax-free share or tax-free unit trusts accounts, giving you the choice to select the instrument that aligns with your risk appetite and financial goals.
- Money Market Account: it allows you to contribute any amount. While the returns of this vehicle may not match the potential returns of asset classes mentioned above, it allows you the flexibility to withdraw without a notice as the need arise. Investing in Unit trusts gives you access to money market returns as a portion of your investment will be diversified into this instrument.
- Notice deposits: this option is ideal for short term savings as you are required to put in a notice to access the funds. For example, FNB’s 7-day Notice deposit requires a minimum R20,000 initial deposit while the 32-day flexi notice deposit allows for a minimum initial investment of R1000. In general, the longer the notice period, the higher the return, thus this is most beneficial for long term savings. You can also grow your savings on a regular basis by signing up for a scheduled transfer, which is free and helps your savings grow even faster over time.
- Fixed deposits: these are a great way for the low-risk investor to guarantee a return over a set amount of time between 7 days and 60 months. FNB’s fixed deposit lock in your capital for a set period but provides a higher return than the notice accounts. This is an ideal way to earn a return that matures overtime and benefit from compound interest. Your capital is also guaranteed when you invest in a fixed deposit, notice deposit or instant access savings account.
Choosing the type of investment vehicle will be based on individual’s financial goals and life stage. It’s important that you enlist the services of certified financial advisor for guidance to ensure you choose the right financial instruments for your financial goals. Most banks can easily help you with identify a financial advisor, if you reach out to them.
