Investment fundamentals: 5 things about investing

Investing basics: the not-boring version

People talk about investing like it’s complicated and only for people in suits. It’s not. It’s making your money work for you. Here’s what you need to know.

Investing is not the same as saving.

Savings are for safety. It’s money you keep aside for emergencies, unexpected expenses or short-term goals like buying a fridge for your Gogo. It’s money you need access to and cannot afford to lose. Learn more.

Investing is for long-term goals, like buying some new wheels. It’s money you won’t need tomorrow or during the coming year. It’s money you put away so it can grow over time.

It’s not getting rich quickly.

If someone says, “quick returns”, run. Real investing is slow and steady. It’s built for goals that are five years away or more. That’s because markets go up and down. Sometimes a lot. You need time to ride out the losses.

Trading or speculating is fast and stressful. Investing is calm and patient. One keeps you glued to your phone. The other lets you live your life.

Investing is compound interest working its magic.

One of the most powerful ideas in investing is compound interest – make sure you understand how it works. It’s when your money earns returns, and then those returns start earning returns too. Over time, this creates a snowball effect.

The key concept is time. The earlier you start, the more time compound interest has to work. Even small amounts invested regularly can grow into something meaningful over many years. Learn more.

Investing is the best way to beat inflation.

That feeling that every time you go to the spaza, a chocolate bar is more expensive? That’s inflation. In South Africa, inflation typically sits between about 3% and 6%; in tougher times, it’s closer to 8%. This means your money loses buying power every year.

Most everyday savings accounts earn less interest than inflation. While your money is safe, it’s slowly losing value. Investing gives you a better chance of growing your money faster than inflation over the long term. Learn more.

It’s about assets.

When you invest, you buy assets. Assets are things that can increase in value or pay you income. Your phone is a good example. If you only use it for scrolling and watching cat videos, it’s an expense. If you use it to build a YouTube channel that earns money, it becomes an asset.

Not everyone is an entrepreneur. That’s fine. You could also put R500 into your cousin Kagiso’s influencer business in exchange for a share of his profits. Congrats — you just bought shares. The stock exchange works the same way, just with bigger businesses. Learn more.

And that’s it – investing is regularly putting your money into assets – like cash, shares, property, debt (yes!) and commodities – that grow in value over time while you do, well, nothing.

Further reading
Everything about the stock exchange

Sources
Manage your money like a grown-up by Sam Beckbessinger

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