Personal Finance 3rd quarter – Author: Roz Wrottesley
IT’S GOOD NEWS THAT TECHNOLOGY – IN THE FORM of online stockbroking websites – is adding a new do-it- yourself dimension to investing, and reducing costs. This trend is supported by a great deal of freely available information, not only on the websites themselves, but also through the Johannesburg Stock Exchange, which sees retail investing as an important developing sector.
But even with great support, trading as an individual is not for everyone – just as DIY in the home is not everyone’s cup of tea, however desirable it might be to
do things your way, when it suits you, and to have control over costs. Natasja Norval-Hart, the 2010 Financial Planner of the Year and a financial adviser at Sasfin, says you have to weigh the cost-savings against the time- savings, and the value of expertise and experience against the satisfaction you would derive from acquiring your own knowledge and acting on your own behalf.
The first thing to consider with direct investing, she says, “is that you can’t dip in an out of it, doing a little bit here and a little bit there. You need to develop skill, knowledge and insight, and you need to monitor the market constantly. At the same time, you should consider the information and insights you might be missing in the absence of a professional adviser.”
Norval-Hart says asset allocation is an enormous challenge, given the choices available, and it takes discipline to select shares on rational grounds, rather than emotional ones, and to hold firm through the
inevitable market fluctuations. As always, you need to take a long-term view and be sure that diversification is central to your strategy.
Barry O’Mahony, of Veritas Wealth, who was named the 2013 Financial Planner of the Year in June, says his company believes that the financial services industry must assist DIY investors who prefer to do their own research through internet resources and implement their buy-and-sell decisions themselves.
“People who see the value in advice will then pay for it, whether this advice is through a certified financial planner, a stockbroker or an asset manager,” O’Mahony says. This advice would include helping you decide at the outset whether you are a long-term investor or a trader and explaining the significant tax implications of each option.
“Importantly, you should consider an online share portfolio only for surplus assets; it is not suitable for someone with limited disposable income. If our clients show an interest in online investing, we make them aware of the downside risk of this investment strategy, while making sure they have no other need for these surplus funds,” O’Mahony says.
His concern is echoed by Gavin Came, former chief executive of Sasfin Wealth. “Setting up an online share portfolio where one can dabble on the stock market is all very well, but not the same as committing one’s entire retirement capital to this channel.”
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