News24 asked Schalk Louw, portfolio manager and strategist at PSG Wealth Old Oak, where he would invest R10 000, with a view to holding the investment at least for the next three years.
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Three years is a relatively short time frame, and I am cognisant that the investment amount may limit the options available to you. As your investment grows, you can start to add more asset classes to build yourself a properly diversified investment portfolio over time.
Currently, RSA retail bonds are offering very attractive fixed rates, so for the lower risk investor, or the investor looking to add a lower-risk component to diversify their portfolio, I would definitely recommend that you consider investing in an RSA retail bond.
Rates as at 11 November 2022:
2-Year fixed rate: 9.50%
3-Year fixed rate: 9.75%
5-year fixed rate: 11.50%
Bear in mind that you will forego some accessibility given the nature of these investments, and you should consider your personal circumstances before making an allocation.
However, it is important to note that even the lowest-risk investment portfolios should ideally have some exposure to equities as inflation remains the enemy of investors over the longer term.
Therefore, looking ahead and considering a longer time frame, I would include an investment in an equity fund (a unit trust invested in shares) to generate long-term growth if you are able. As an equity fund invests primarily in shares, you will most likely be able to gain access to local and offshore stocks (based on the fund you choose) without having to shell out a large sum of capital to gain direct entry to the stock exchange.
To open a managed share portfolio, investors often require a minimum amount to make exposure to equities, and the costs of managing it, worthwhile.
While there are low-cost trading platforms that offer investors a good entry point into the stock market, many investors may not have the proper knowledge or expertise to choose wisely, and risk losing their capital as a result.
If you already have a well-diversified portfolio and are looking to add to it, investing in gold would be a good addition to a diversified investment portfolio, in my view. Gold prices have remained stable in real terms, offering a way for investors to preserve their capital despite market volatility over longer time frames. It also acts as a good hedge against inflation (based on historical data, the gold price tends to rise when the cost of day-to-day living increases).
To gain exposure, I recommend that you consider investing in a gold exchange-traded fund (an ETF tracks a specific index, sector, commodity or asset class), such as the SPDR Gold Shares ETF (GLD).
The underlying assets are invested in physical gold and should move in line with the gold price. A gold ETF offers investors a more affordable way to gain exposure to this commodity.
Of course, your risk profile will determine how much you should allocate to each option above. Finally, remember that patience and a long-term time frame are crucial to achieving investment success.
Follow Schalk Louw on Twitter at @SchalkLouw.
The article has been updated to clarify investment options.
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