Are you a South African between the ages of 20 to 35 and looking to take control of your financial future? If so, you've come to the right place. In today's economically uncertain world, it's more important than ever to start investing early to prevent yourself for struggling financially in the future. The world of investing offers the simplest and most straightforward way to buy assets and build your NetWorth plus diversify your income. As you start your journey, one challenge you might come across is "how to choose the right account for your needs"... well...
In today's blog post I will introduce you to the various account types offered by Easy Equities, a popular online investment platform in South Africa. Whether you're a seasoned investor or just starting out, Easy Equities has something to offer everyone. But please note that this post is not just about Easy Equities but about investment accounts that you can get from most decent brokers so I will definitely mention some of my favorite that are not Easy Equities. let's go...
Why Choosing the Right Account Matters
There are a few reasons that make choosing the right account important. The main reason though is that you want to maximize the amount of money you can make, but here are the other reasons
Alignment with goals: Different accounts cater to specific financial objectives, such as retirement savings, tax-free growth, or short-term investments.
Tax implications: Some accounts offer tax benefits, while others may have certain tax obligations.
Risk tolerance: The type of account you choose should align with your comfort level regarding investment risk.
Investment horizon: The length of time you plan to keep your investments will influence the suitability of different account options.
By carefully considering these factors, you can make an informed decision that sets you up for long-term financial success. Handling admin (as simple as it is) is an important part of financial success. Most people find themselves not being able to purchase assets, rent apartments or doing "big financial moves" because they neglect admin. Make sure you understand the administrative implications of investing, even if it is just a 5-minute job.
Some important stuff to note:
I have not mentioned the Easy Credit account, Term Life Insurance account, Crypto account, provident fund account, preservation fund account and living annuity account. Mainly because these are either accounts I do not personally use or are not a part of the core offering of growing your wealth while you are still under 35 years old.
Here are the accounts you get on Easy Equities plus how I personally use these accounts.
For Investing here at home (South Africa)
1. ZAR Cash Account
Purpose: Primarily for buying and selling shares listed on the Johannesburg Stock Exchange (JSE).
Features:
Easy to open and manage.
Low minimum investment. (R1 as of September 2024)
Suitable for both new and experienced investors.
Can be used for individual stocks, unit trusts, ETFs, ETNs, and AMCs.
How I use these accounts?
I use this account to hold South African shares that I believe will grow in value over the next 5 to 10 years. The JSE has about 400 assets to choose from so this account can be used to build a solid portfolio. Since I live in South Africa, I am able to spot opportunities and take advantage of them using my ZAR account. I would recommend using this account to improve your investing skills too. If you struggle to analyze local companies, then you will struggle even more overseas.
I also use this account for administrative purposes such as transferring money from my bank account directly into my ZAR account and then transferring the money into my other Easy Equities accounts. I do that because the bank I use enables me to use the Easy Equities ZAR account like a bank account.
For long-term saving mixed with investing
2. Tax-Free Investment (TFI)
Purpose: To grow your wealth tax-free.
Features:
Annual investment limit. (R36 000 in 2024 but it keeps rising)
Tax-free income and capital gains.
Can be accessed at any time.
Suitable for long-term investments.
How I use these accounts?
This is my favorite Easy Equities account. It is the account I fund first. Every month I start by maxing out my TFSA funding limit before funding any other accounts. I use the TFSA to hold my local 7 Fund ETF portfolio and bond investments. This account is all about maximizing the potential growth of my money and since there are no taxes on the growth of my money, it means I make the most amount of money I can make with this account. If you are a person who does not pay any taxes, planning on investing less than R36 000 per year then this account is the best for you. When your income grows though then maxing the RA account to claim tax deductions becomes potentially the better option especially if your taxes are high.
For Investing Outside South Africa from South Africa
3. Other country Cash Account (USD, AUD, EUR, GBP)
Purpose: For buying and selling shares from the USA, Australia, Europe and the United Kingdom.
Features:
Easy to open and manage.
Low minimum investment. ($1 as of September 2024)
Suitable for both new and experienced investors.
Can be used for individual stocks, unit trusts, and ETFs
You can convert your Rands to the other currencies in the Easy Equities
How I use these accounts?
I use the USD account to house my 7-fund ETF portfolio that is focused on the US markets and global markets to. However, I prefer to use Interactive Brokers (IBKR) for investing outside South Africa. The platform offers over 40 000 global assets and close to a million bonds and other assets. This makes it the ideal choice for investing globally... but you should only use this option if you have at least R50 000 or are planning on investing long-term without touching the money. The reason is that it can be expensive to move in and out of IBKR especially using a wire transfer. There is a service called Wise that you can use but it is still a hassle. This is where the Easy Equities global accounts win, they are simple to administrate. They might not offer thousands of shares to choose from, but the simplicity actually makes them better.
(Here is a free 20-page Beginner Investor Guide that has 7 ETFs you can consider buying. Click to download)
For Retirement Investing before retiring
4. Retirement Annuity (RA)
Purpose: To save for retirement.
Features:
Tax-deductible contributions.
Tax-free growth on investments.
Can be accessed only after retirement.
Various investment options available.
How I use this account?
This account functions as my main retirement savings account. The reason I like it is because I get to choose the fund managers and assets in my account. This is the second account I fund after my TFSA. In my opinion, the Easy Equities RA is probably the best account for people who want to always keep track of their retirement savings and investments. The other key feature I like about this account is that it has no minimum monthly deposit unlike other RA's, this means that I don't have to add funds to it every month but rather when I deem it necessary. So, consider this account if you do not have an RA provided by your employer.
For Property Investing
5. Easy Properties
Purpose: For investing in property.
Features:
Access to a range of property investment options.
Professional property management.
Potential for rental income and capital appreciation.
How I use this account?
I have participated in 17 of the properties available on the Easy Properties platform. The growth in the value of the properties has been good (23%). My only complaint is about the dividends, the money I invested could have seen better performance in the stock market plus received a better dividend. I could have bought QYLD ETF and had my money grow by over 30% in the last 3 years and earn 11% in dividends per year (and these would be US dollar gains which become even more when converted to Rands) but here is the thing,
We invest in property for long-term value and with less fluctuations. This then makes Easy Properties one of the best property investment vehicles to start with. It is a great platform for investing in property without using bank finance. I would argue that it is a great place to start before trying to get bank finance and manage your own property, especially when you are still young. This is the account I fund last because there are not always investment opportunities available. But you can still buy property from as little as R1 and grow your money.
How should you start?
It's simple, just get started. Don't wait until you have thousands of rands, just get started from wherever you are. Choose a broker, fund your account and buy some ETFs if you do not know which shares to buy. If you need support, then consider booking a free coaching with me, click the button below:
Remember: Opinions expressed in this article do not and never will constitute financial advice. Every person’s financial situation is different; I recommend you speak to a financial adviser about yours
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