Many South Africans mistakenly believe they need substantial capital to begin investing.
However, according to Haydn Johns, Head of PSG Life and PSG Invest at PSG Wealth, the most important step is simply getting started with whatever amount is available and maintaining consistency.
“One common misconception among new investors is that small contributions don’t make a difference,” says Johns. “But the power of compounding should never be underestimated. Even modest investments, when made consistently, can grow significantly over time.”
Prioritising Saving Over Spending
Johns highlights that for many individuals struggling to save, the issue is often excessive spending rather than insufficient income. “A key strategy is to prioritise saving before spending,” he advises. “Developing a habit of setting aside savings first and using the remaining income for expenses can make a significant difference.”
According to the BankservAfrica Take-home Pay Index, the average nominal take-home salary for South Africans saw a 16.3% year-on-year increase in January 2025. When adjusted for inflation, real take-home earnings rose by 12.8%.
Turning a Salary Increase Into an Investment Opportunity
John suggests that salary increases present a great opportunity to start investing. “Before making lifestyle changes or big purchases, consider allocating a portion of your raise to a monthly investment,” he recommends.
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Practical Steps for New Investors
For beginners, budgeting is essential. “A well-structured budget helps identify unnecessary expenses that can be redirected into investments,” Johns explains. While a good target is to invest 15-20% of gross income, the most crucial step is to start even with a small amount.
He also emphasises the importance of an emergency fund. “Aim to set aside at least three months’ worth of living expenses in a liquid investment that allows quick access, ideally within two to three days, to provide financial flexibility in case of emergencies.”
To maximise returns, Johns encourages investors to take advantage of tax-efficient options. “Contribute as much as possible to your retirement fund up to the 27.5% income cap to benefit from tax deductions. The tax savings can then be directed toward a tax-free investment, which allows annual contributions of up to R36,000.”
Choosing the Right Investment Strategy
For young investors with a long-term outlook of 20 years or more, Johns recommends funds with a higher equity allocation. “Higher equity investments offer better growth potential, which is necessary for meeting retirement goals,” he notes.
A good starting point, he suggests, is a diversified unit trust portfolio within a tax-advantaged investment vehicle, such as a retirement annuity or a tax-free savings account. “This approach ensures investors benefit from tax savings, effectively increasing their net returns over time.”
Avoiding Common Pitfalls
New investors often fall into the trap of chasing quick money. “Many so-called ‘get rich quick’ schemes come with significant risks, and scammers frequently target young investors eager for fast returns,” Johns warns.
Instead, he advocates for patience and a disciplined, long-term investment strategy. “Successful investing is about consistency. Compounded annual returns of 10-15% can lead to substantial growth over time,” he concludes.
