New to investing? Here’s a guide to understanding TFSAs, EFTs and saving in money market accounts

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A healthy skhaftin is incomplete without some fruit and veg – those are your short-term investments from a financial planning perspective.
A healthy skhaftin is incomplete without some fruit and veg – those are your short-term investments from a financial planning perspective.
Erik Isakson/Getty

We all know that one colleague who makes all our stomachs growl with hunger as soon as they get up with their lunch bag and head for the microwave.

You know he or she is not about to have a sad-looking sandwich or salad for lunch. Oh no. For them, it’s a juicy, grilled piece of protein with brightly coloured steamed veggies on the side, along with a tasty seasonal fruit salad topped with chia or flax seeds for dessert. No wonder they make such a production of taking a break for lunch.

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The yummy aroma of their meal wafts through the office, making us regret not packing last night’s leftovers. This kind of regret is similar to the kind of regret that people who start investing late feel when they see retirement approaching, and their peers looking forward to downtime while they start panicking about having to work long, long after they turn 55.

The good news, says Sebastian Pillay, Head of Share Investing at FNB Wealth and Investments, is that just like your lunchbox, you can also make better and healthier financial decisions – and it’s never too late to start.

Thinking of investing in the same way you think of preparing a healthy lunchbox for work can be useful for the beginner. According to Sebastian, the key ingredients to a “healthy investment lunchbox” include: 

1. Something healthy and colourful

Just like we add healthy fruits and vegetables to our diet, we need to look for those investments that will serve us well in the long-term, says Sebastian. 

“A well-diversified unit trust will give you exposure to different asset classes like cash, bonds, property, and equities in a single investment. This helps investors get maximum benefit during their desired investment period. To maximise your opportunity, a Tax-Free Savings Account (TFSA) is an ideal vehicle for longer-term investing and saving without the tax impact.”

2. Protein to build your investment portfolio

Protein is an important part of a balanced diet and a major energy source. “When investing, it’s important to diversify through local and global exposure,” says Pillay.

An easy way to do this is through Exchange Traded Funds (ETFs) which are passively managed investments that track a basket of shares or an index. This is a low-cost option to get exposure to local and global shares that make up an index. Investing in ETFs offers flexibility by offering a low-cost access point with the relevant diversification which is central to a core portfolio just like protein in a balanced diet. 

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There are many types of ETFs to meet your requirements but ideally when you have a long-time horizon staying invested and adding regularly will help you reach you goal. 

3. Snacking on those short-term investments 

We are often told to keep our snacks healthy with a combination of healthy fruits and veggies. Sometimes we need to look at our investment options in the same light, as markets move and shift daily, says Sebastian. 

“For those short-term goals, snack on a Money Market account which offers the flexibility to contribute amounts as you wish, and you can withdraw the funds should the need arise. It’s ideal for saving for next year's school fees, stationery, school uniforms, or even extracurricular activities for your children.” 

A notice deposit is also ideal for short-term investments which provide zero volatility or market risk. In general, the longer the notice period, the higher the return and is most beneficial if you are not willing to take on any risk and saving for a near term goal. 

“Let’s face it, sometimes delving into our finances can become a tad bit boring or leave us feeling depressed or overwhelmed. However, there are ways that will make managing your finances fun and easy for you and your family. So next time you prepare your lunchbox, think of how and where your next investment will be.”

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