Investing is defined on dictionary.com as “putting money into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit”. A common misconception is that investing is reserved for brokers or other professionals in the finance industry. This is not the case in 2020, as students can also start investing today.Joshua Prins, co-founder of FinChat, an online platform with the purpose to “minimise the financial knowledge gap in South Africa and to empower the youth”, shared his personal investment journey with PDBY. Prins stated that he started with the JSE Investment Challenge. This challenge is available to students and scholars, who play with demo money and go through the process of investing in shares and making profits or losses. Prins explains that he started out having to learn everything about investing himself, and believes that “experience is the best resource”. Gaining experience in investing early is also noted in the biography, Warren Buffett: The making of an American Capitalist. Roger Lowenstein writes about the investing giant’s first stock purchase, which he made when he was only 11. Today, Buffett is known as one of the world’s most successful investors.
Where to start
For students starting out, Prins has three recommendations. “Firstly, open a tax-free savings account at your personal bank”. Tax-free savings accounts, according to the latest SARS information, allow an individual to deposit R36 000 per tax year or R500 000 during their lifetime without paying tax. Interest is earned annually and can be paid out monthly. His second recommendation is using Franc, an investment app created by Thomas Brennan and Sebastian Patel that enables easy access to investing. It is a lower risk, lower cost alternative for students or individuals just starting out with investing. On their homepage, franc.app, their aim states that they “believe everyone should be able to access the best investments”. Lastly, Prins suggests the app Easy Equities as a next step for students interested in investing. Easy Equities is a free app available on both Android and iOS that allows an individual to purchase fractional shares. This allows students to start investing small and build their investments over time. In the article, “7 Easy ways to start investing with little money” , David Weliver describes fractional shares as a “game-changer” which allows an investor to buy a small part of a share. Before fractional shares, stock exchange functioned on a “per share” basis. This means that if shares were sold at R1000 per share, the investor was forced to buy at least one share. Weliver explains that fractional shares can give an individual the opportunity to start investing on a limited budget. Thus, opening the investment world to students as well.
Where to find help
Learning a new skill can be daunting at first, but there are many platforms and websites available to assist students on their journey. FinChat is one of these platforms. They have podcasts, newsletters, and social media posts aimed at the youth of South Africa, where topics such as personal finance management, investment, and entrepreneurship are discussed. Students can find more information at finchatco. com. Investopedia.com is a website that serves as an encyclopaedia for investment terminology and other related information. It is easily accessible and offers advice as well as the latest market news. The Easy Equities website, easyequities.co.za, also offers Easy Equities Academy, a learning experience that consists of a technical and practical side to equip an aspiring investor with the knowledge to make their first investment. With their help, students can start investing on the demo version before taking the next step and investing real money.
Why start now
In the article, “How to invest in your 20’s”, Forbes describes the ages of 20-30 as “the last decade you’ll have before you take on the traditional roles and responsibilities of other, older adults like your parents”. In the same article, financial advisor Mitchell Bloom emphasises how important these ten years can be. The reason for the importance of those ten years is compound interest, a concept Albert Einstein once praised as the “eighth wonder of the world”.
Investopedia.com describes compound interest as interest calculated on the initial amount invested as well as on the interest already earned. Bloom explains that the interest earned during the first ten years of investing might not seem like a lo t, but it will have an effect during the years to follow .
It is important to remember that investing is a skill that needs to be developed over time. The platforms available today allow students to start small, and at a low risk, and build on that foundation.
Photo: Cassandra Eardley