PART 1: INVESTING & EASYEQUITIES
In the 1960’s and 1970’s a psychologist at Stanford University gathered a group of children and conducted an experiment, the results of which would be used to explain behaviour for decades to come. It’s known as the Marshmallow experiment. Each child was given a marshmallow and told that if they wait 15 minutes to eat the marshmallow, they would get a second one. They were then left alone in a room with that one marshmallow. Some kids waited and were rewarded with a second one. Others forewent the reward and ate the marshmallow immediately. The kids in the experiment went home, but the psychologist followed up with them as they grew up. It was discovered that the children who waited and earned a second marshmallow, delaying their gratification, had lower body mass indexes, did better in school and were high achievers. Discipline and being able to delay instant gratification for a better future reward became characteristics of success.
In her book, Make your Money Work For You, Anthea Gardner describes investing like the marshmallow test.
“You can earn money today and buy yourself something nice or you can invest it and have two nice things in a couple of years”.
She says it requires that same discipline as the marshmallow test.
While investing can be considered as a form of savings, Investing is not the same thing as saving. In her book, You’re not Broke, You’re Pre-Rich, Mapalo Makhu explains savings as short-term – something you put aside for 6 months to a few years. Savings, unlike investments are liquid which means you can easily access that cash without losing money on fees or market fluctuations. Investing, Makhu explains is when you set aside a portion of your income for a long-term period, anything from 5 to 25 years. The purpose of investing is to protect your money against inflation and grow wealth. Investments come at a higher risk and are less liquid than savings.
When it comes to investing, there are numerous options from Exchange Traded Funds to Unit Trusts to Tax Free Savings Accounts and property. We’ll be discussing how to invest in stocks. An investment type that EasyEquities has built a platform around to allow anyone with a little bit of money to participate in.
EasyEquities is an online investment platform that lets people invest in stock markets (namely the JSE and NYSE for now). They live by the mantra of democratising investing for all. In her Chapter entitled “who’s who in the investment zoo”, Anthea Gardner, described platforms like EasyEquities as the zookeepers. She explains that the average non-professional investor doesn’t have access to the stock market. To buy or sell shares, the investor needs to go through a trading or investment platform. What EasyEquities does, is they allow the average person like you or me to buy and sell shares electronically.
Mapalo Makhu explains that when you invest in shares, you are literally buying a part of a company. EasyEquities allows you to buy shares in both local and international companies listed on the JSE and NYSE. For example, instead of buying an apple watch, you can buy shares in Apple the company. When you do that you get to share in the growth of the company. This is done either through your shares appreciating over time or through dividends paid out by the company. The risk, however, is that you also share in the bad which means that when a company you’ve bought shares in performs badly financially, your shares depreciate, or you don’t get paid dividends.
When it comes to investing there are many things you cannot control; but there are aspects you can control. In her book, Makhu describes these as the 3 C’s and one of the amazing things about EasyEquities as you will find out below, is that they allow you to control the 3 C’s.
Costs: Look at low-cost investments. According to Makhu there is no reason to invest in high cost-investments. Part of investment costs is the fee structures you need to pay. Fees is something Sam Beckbessinger also discusses in her book “Manage Your Money Like a F*cking Grown Up”. She urges you to invest in a low-cost investments with the lowest fees you can find, from a reputable institution. EasyEquities ticks all the boxes. What separates them from other platforms is their low transaction fees which allow them to remain the most affordable option on the market – you pay 64 cents for every R100 invested. You can find out about their fee structure here.
Contributions: Warren Buffet’s famous advice is “don’t save what is left after spending, spend what is left after saving”. Makhu suggest looking at your monthly budget and deciding what you can take out to invest and then committing that amount every month – before you start spending. As you are the one deciding the amount you can contribute, you can adjust and increase when possible. To start investing with EasyEquities you do not need a lot of money – there are no minimums or monthly brokerage fees. You can start with as little as R10.
“don’t save what is left after spending, spend what is left after saving”.
Consistency: Makhu says that it’s important to be consistent and invest no matter the economic outlook – consistency she says is what really counts. So, if you can just put aside R50 a month to invest, you can set up an automatic debit with EasyEquities which allows you to be consistent with what you invest each month and make your money work for you.
PART 2: FAQs
To help us make sense of investing, we sat down with Shaun Keeling and Standwa Nongauza of EasyEquities to answer all of our (and your) questions.
Explain what investing is?
It’s generating wealth through getting accumulating assets. It’s owning something that will get more expansive in future without changing much of its intrinsic components.
Why you should you invest over saving?
You can’t have one without the other, so the two concepts are kind of married. But investing is the more fun one half of the equation. While savings has a more predictable outlook and returns, investing has the potential to bring you returns much greater than you would get saving, and greater than inflation
How do you start investing with EasyEquities?
Investing on EasyEquities is like ordering food on Uber Eats, or buying clothes on Superbalist. Once you’ve registered for an account and completed your profile, we verify your details and voila! If you are an international, you would have to submit documentation to verify your identity.
What is the minimum amount you can invest and what is the optimal amount you should invest to start seeing results?
You can invest from any amount you wish. 10 Rand to 5 Million Rand. There is no ‘optimal’ amount really, it’s all up to your own strategy that you can develop as you grow.
How often should you be investing?
Again, it depends on your own strategy. If you have saved up a nice lump-sum you want to use, then go for it. Otherwise you can fund your account and invest whenever you like; or have a scheduled debit order to fund your account.
What should you take into consideration when building a portfolio?
Consider diversification – into different markets, sectors, and by market capitalisation.
Editors Note: In every book we’ve read discussing investing the letters ETF come up. ETF stands for Exchange Traded Fund. In Become Your Own Financial Advisor, Warren Ingram explains that ETFs function like an ordinary share, but consist of a basket of investments.
In Manage Your Money Like a F*ing Grown Up, Sam Beckbessinger further explains that an index ETF is like buying the whole market. The fund tracks the market which is the scorecard of how everyone did as a whole. What this means in simple terms is that if the stock market goes up by 2%, the fund goes up by 2%. Beckbessinger describes investing in ETFs as magic because it’s so easy, especially for beginners. She says it’s the perfect strategy if you can’t beat the market by actively timing funds or picking winning companies. It’s also good if you’re not confident or can’t find the right fund managers who would do it for you. It is the one financial product she’d recommend, and that sentiment is shared in every other book.
How long do you have to leave your money there to see results?
It depends, but I hear the pros always talk about revisiting your portfolio every three months. I don’t know about that. But over the long run they say you should invest with a 3-5-year outlook AT LEAST.
What if you need to take out your investment, how does that work?
You simply sell the stocks/instrument from your holdings. The funds will reflect in your wallet as ‘Available Cash’. Then go to the menu page and select ‘Withdrawal’ under the My Funds section. Confirm your banking details, and then hit the button.
How do you make sure you’re not getting taken for a ride? There’s so much jargon, what are the red flags to look out for?
An FSP number. That’s your first and easiest frame of reference. If it feels like a scam, then you can do an online check on the FSCA website whether the company you are dealing with is a licensed financial service provider.
Editor’s Note: EasyEquities has an incredible FAQ section here which goes through a lot of the financial jargon and explains exactly what everything is and how it works.
Is it possible for the average person to invest abroad?
Yes, the average person can. EasyEquities gives you access not only to JSE-listed enterprises, we offer international stocks as well. For now, that’s just U.S companies, but we will be launching Australian stocks on the platform soon. Watch this space.
What hidden terms and condition should you watch out for when investing?
A good place to start would be the cost profile. Look through a company’s cost schedule to see what you’re paying for, because a lot of those costs may not be included in the marketing material.
If you have debt should you pay it off before you start investing?
That we can’t say, because we’re not licensed to give financial advice.
Some people have a bit of both, others pay debt off first, and others live their best life. All of which are not mutually exclusive.
Editor’s Note: In her book, Make Your Money Work for You, Anthea Gardner tackles this question and says the answer is not straight forward. She says that some debt can be considered crucial (car loans, mortgage loans) while other is non-crucial (store cards, credit cards). Her advice in the book is to get rid of or control non-crucial debt, but not to forego on saving and investing, especially pension funds which heavily benefit from compounding. She says that unless you have access to low interest debt when you need it (emergency situations) that can be paid off within a month, you should save enough for an emergency fund. She suggests that you put that money into a low risk investment such as cash or money market, even if you do have debt. EasyEquities makes it easy to withdraw funds should you need them, making it a good place to put money if you feel like you may need to withdraw in an emergency.
What are the Tax implications of opening an Easy Equities Account?
Any benefit you gain or profit you make from an investment, whether through interest earned, profit on the growth of your investment, or dividends that have been paid to you, is subject to tax. To make it easier for you, EasyEquities provides the tax certificates you would need to submit to SARS which state how much money you’ve made from your investments. This blog on taxes you pay when you invest and how taxes work on your EasyEquities account provide further explanations.
PART 3: OPENING AN ACCOUNT
Before we go into opening an account and investing with EasyEquities, I want to share Anthea Gardner’s basic steps for investing and creating a financially independent future.
- Understand your financial goals and appetite for risk. This includes both medium and long-term goals.
- Make a budget so that you don’t spend more than you earn.
- Get rid of unnecessary debt.
- Start investing as soon as you can. If you’re unsure, put your money in a conservative product and keep adding. You can always change things up as you learn more.
- Build a diversified portfolio.
- Be realistic – she says that trying to double your money in 2-3 years is unlikely.
- Look at the costs of investing and be aware of them.
- Consistently add to your investments.
- Enjoy the journey of becoming more financially knowledgeable and independent.
Now that we have the steps, it’s time to invest. Feige is sharing her sign-up diary with you.
A few days ago EasyEquities celebrated their 5th birthday, and with full disclosure, for about 3-4 of those years I have wanted to sign up but procrastinated out of a combination of fear and the feeling that I didn’t know enough and wasn’t in the right place to invest. This month I decided to put my money where my mouth is and just do it. Not only to benefit me, so that by the time EasyEquities turns 10 I can say “wow, I’m so glad I did it”, but also to test how easy it really is for you.
To disclose even further, after reading the books in our money books recommendation list I decided my first step was to identifying money I spend every month unnecessarily. My thought process was, even if it is as little as R50 – If I divert this monthly into an investment, I won’t even notice it missing from my life and in a few years, it could really add up. The easiest item was an account I had open, that I was no longer using, that was costing me R57.50 in monthly fees. I went ahead and closed it – before this month’s fee was deducted. It felt exceptionally good and I now had an extra R57.50 lying around.
Investing with EasyEquities involves 7 steps:
1. Register at easyequities.co.za
2. Complete your profile with your personal details
3. Once done, take your demo account for a spin (find the brands you love on the ‘Invest Now’ page)
4. You should get verified and ready to make a deposit into your account thereafter
5. Make a deposit into any of your EasyEquities wallets
6. Go over to ‘Invest Now’ page to select the brands you wish to buy (for real this time)
7. Keep an eye on your portfolio from the ‘Account Overview’ page
2:10pm: I visit EasyEquities and press the register button.
2:13pm: My basic details have been filled in.
2:16pm: Before agreeing to their costing and t&c’s, I click on the links to read them.
2:20pm: I’m puzzled by the word “securities transfer tax” on the cost page. The great thing is that there are note references on every charge type which is then explained on the next page. I do also google it, because google.
2:31pm: I’m puzzled by the recommendation to transfer funds rather by EFT* (it’s noted as cheaper than the alternatives, but debit order fees show as R0.
*This is later clarified in my welcome email where they say there is no charge for EFT’s.
2:36pm: I’m done reading the cost profile and move over to terms & conditions. Its 74 pages eek. I decide it’s time for a break. It’s taken me 26 minutes so far.
7.07pm: It’s time to resume. I didn’t close my browser and pick up where I left off. This is where it’s going to get timeous. By the time I’m on page 22, the reading is starting to feel tedious, I totally get how many people don’t read through these, but I am learning quite a lot so feel like I need to continue. It is easy to follow but there is a lot.
7.22pm: I break for dinner (17 minutes).
8:02pm: I have completed page 59 and the rest is annexures of forms to fill out (where required).
8.05pm: I finally click I confirm + register.
8.06pm: I start completing my profile. I notice that they give you the option to add another citizenship. This is in case you have another citizenship which would influence the tax.
After I’ve added in my income information, there’s a prompt to save which I do. It takes me to the next Tax page but I notice before that there is information to upload documents, so I go backwards to find this. It has three sections; ID, Proof of address and supporting docs. All say optional with a note saying, “Alternatively, you can email the documents to firstname.lastname@example.org.” I choose to leave this out and see what happens.
I move onto the tax section and find I need my tax number. My filing system is what I called organised chaos, chaos because only I would know how to find things, and organised because I have it within 4 minutes.
I’m now onto the bank section. I complete with ease and now it prompts me to log out and back in. Its 8.35pm
8.37pm: I log back in and am immediately presented with options to start investing. They ask what interests me (these filters reset every time you refresh so it doesn’t mean you’re stuck with your initial choice). I still feel like I don’t know what I’m doing but I’ve read Zissy’s article and decide to select ETF’s as my investment type. They also allow you to filter by risk type which is pretty cool. I choose all.
I then scroll down and am shown an online shop style of options. Some options show an icon of a purple rocket which represents a fund that is thriving. I randomly click on one to see what information I get shown and it’s pretty phenomenal. There are links to the fund’s minimal disclosure document, fund information and effective annual cost. They also tell you what type of investment it is and what the risk type is. Finally, they have a tab “what’s been happening in the market” which gives you a nice overview of well-presented data to help you make a decision. They really do make it easy.
I have zero funds added to invest so I decide to go back to my account tabs. It’s now 8.50pm.
8.54pm: I go to my account’s overview page and I see it provides a nice overview of your activity. It also shows your transaction history.
I’m really enjoying working through the EasyEquities website. I click the share the love tab at the top and am given referral codes to share either via email, facebook or twitter.
I signed up with #EasyEquities! Can’t wait to start investing in my fave brands. FOMO? #Cheapest #Easy Sign up here: http://bit.ly/2PuoToT
I find the demo account filled with R100,000 which is for you to practice.
9.01pm: I still haven’t figured out how to add funds to my account, so I return to invest now. I try work through the steps to buy something but am prompted with the below message.
This security is currently only available for trading through a BUY INSTRUCTION. A BUY INSTRUCTION will execute within a reasonable time of the instrument becoming available on the platform again. This could be after the market has re-opened or when the particular instrument is unsuspended. For more information on BUY INSTRUCTIONS click here.
I decide to rather check my mail for welcome emails and find 3.
The first sent at 8.05pm welcomes me. It provides registration details and a what’s next section. They also provide links to resources, FAQ’s (or as they call it ‘a few common ummm’s and aaah’s’).
The second at 8.19pm lets me know that I’ve been FICA verified. It also gives you instructions on how to add funds into your account. The options essentially are to wait a bit but save or do it immediately and pay; 1. By EFT, which is free but takes 2-4 hours usually or up to 48 hours in some cases. or 2. By credit card or SID. This reflects immediately but you are charged a premium for the speed. I am obviously going to choose EFT. I’ve waited long enough, I’m not suddenly in a rush.
The third email welcomes me to EasyEquities academy and asks me to confirm my email. I do and it takes me to a signup page. I do and instead of going to courses, I decide it’s time to stick that R57.50 into my EasyEquities ZAR account.
9.23pm: I log into my bank and start adding them as a beneficiary. The instructions in the email are beyond easy to follow.
9.29pm: Payment is done! I’m not going to lie, I’m super proud of myself. While I’m logged on, I may as well pay some bills too 😉 Now that I need to wait for my funds to reflect, it’s a great time to call it a night. Tomorrow the fun begins.
It took me a total of 2 hours and 31 minutes and this included the sign-up process, 56 minutes of reading the T’s&C’s, reading all welcome emails, exploring the EasyEquities websites and making my first deposit into my EE account. At no point during that time did I feel overwhelmed or feel that it was difficult. Everything was easy, amazingly set out and even when I failed to find where to add money to my account, I was able to intuitively problem solve without needing to request their help.
6.15am: I get an SMS from EasyEquities saying my account is ready with a link to log in.
6.20am: I get an email ‘from’ Tanya from EasyEquities introducing her role at EasyEquities and letting me know my account is ready to ‘rock and roll’. There is also a link to their educational content.
6.32am: I get another email from EasyEquities to confirm receipt of my EFT deposit so I guess it’s time to put my R57.50 to work.
I click the educational content and find myself really enjoying their blogs. I especially enjoyed their illustration on how to select shares to invest in.
I decide to go the ETF route and select the Satrix 40. It shows the list price at 50.01 so I assume if I purchase 50.01 I’d get 1 share. I select my chosen amount and hit purchase. It shows the transaction fee as 7c and asks me to confirm. I do and am confused when it shows me I now have an FSR of .9926 rather than 1 share.
I learn that this could be because there is a 15 minute price delay on the website or that my settings are made to include the transaction fees. This setting is easily adjustable in the accounts preferences page.
I head to my account overview page. I see I’ve already lost 7c on the value and I laugh as I recall investment advice that you should let your money sit and shouldn’t check it every day. (A few days later I’ve gained 5c). All that’s left for me to do is rinse, repeat and start building a portfolio.
I decide to make use of the demo account to test the waters before I strike again and I “buy” R250 worth of equities in 3 companies I give most of my money to. This is such a fun feature on the EasyEquities website and I notice how differently I feel hitting select on these faux purchases than I did when I was using my money. I think it’s safe to say that I’m now in on the investment game.
PART 4: CONCLUSIONS
Isn’t it funny how easy it is to waste money on things you don’t need or pay for services you don’t use, without a second thought – yet – investing is attached with fear. When we aren’t mindful with our purchases, we are losing 100% of our money instantly with no hope of ever seeing it again.
In his final note in his book Become Your Own Financial advisor, Warren Ingram states that financial matters are only complicated if you allow them to be.
Financial Management isn’t something we learn at school. For most, it’s something we must teach ourselves. Oftentimes it’s something we avoid out of fear or just not knowing where to start. We feel embarrassed or stupid for nor knowing or making bad money choices. We overcomplicate it to the point that it becomes too overwhelming to even think about. But Ingram is right. It’s only complicated if you make it complicated.
There’s this wonderful trend of South African books coming out that are dedicated to explaining and assisting with financial management. In the beginning of the month, we shared 5 of those books. Each of them is a useful resource that explains how to manage your money in a South African context. Each book discusses investing and can be used to teach you more about investing and to simplify the process. They’ve been quoted throughout this article.
In addition, the EasyEquities website has numerous resources including a blog and video resources that answers common questions regarding investing. EasyEquities was born out of the vision to disrupt what we think of investing. To make something that is often overcomplicated and exclusionary, easy, fun and accessible. It is for that reason that they were who we chose to go to when we decided to create a beginner’s guide to investing.
EasyEquities have removed the misconception that investing is complicated, inaccessible and requires a lot of money. They make it easy and fun. Financial matters don’t have to be complicated, and with EasyEquities investing most certainly isn’t. Visit www.easyequities.co.za to learn more about how you can start investing safely and easily with what you can afford today.