The smart guide to investing

If you haven't invested before because it just all seems too complicated, this guide is for you. Read on to achieve financial peace of mind and your dreams, writes Glynis Horning.

- Glynis Horning

why?

It's simple: the only way to make money is to work for it, or make it work for you. If you keep it in your purse or just sitting in the bank, you'll never have more than what you save. But if you invest it wisely, it will generate more money by earning interest.

SAVING VS INVESTING

When you save money, you set aside the cash you don't need now in a place that is relatively free from risk so that it's sure to be there for a rainy day. You know you can access it at the drop of a hat; however, the financial returns tend to be quite low.

When you invest money, on the other hand, you buy assets such as shares, unit trusts or property in the hope that you can later sell it for profit. This is a riskier business, as you could lose the capital altogether, but you might receive higher returns in the long-term if it pans out in your favour.

how?

Set a goal to motivate yourself to invest rather than spend. It could be to retire comfortably, to buy a car or house, finance a wedding or a child's education, or simply to have a holiday or hot new iPhone. Aim to invest around 10 - 15% of your income for retirement (your employer may pay half), and 5-10% for other goals. Draw up a budget for this and make sure you stick to it, says Cape Town financial planner Debbie Netto-Jonker.

who?