The greatest, time-tested secrets of wealth-building get a modern-day turbo-boost with this exciting investment medium for the average person in S.A.
The most exciting fact, and indeed privilege, about living in these times, is the immense volume of information that we have at our fingertips.
On this writer’s shelves alone, is conclusive evidence of in-depth research and psychological studies into the personal success habits, or otherwise, of over 30 million individual subjects conducted during this century. Not to mention the reports and books produced containing the collective Wisdom of the Ancients that has stood the test of time.
In a nutshell, the secret of great wealth is very simple! Just find the people who have become very wealthy themselves and analyse how they did it. And, if you can get it, follow their advice. Also take a close look at the financial failures in life and analyse what it is that they DID NOT do. And DON’T follow their advice! But learn their lessons well.
What? You don’t have the time! Well, don’t worry, here is some of my simple analysis of their secrets for you to follow…… if you want to be wealthy, of course.
1. Get Into The Savings Habit
Ancient wisdom has it that a man should put aside not less than one-tenth of his earnings to create a legacy for his future and that of his family.
Great advice, for in this tough world where problems beset everybody at the most inopportune times, it’s great to have some cash to fall back on to face any serious material crisis in your life. And a crisis you will have at some point in your life, you can bet on it. Are you prepared?
20th Century wisdom and evidence demonstrates conclusively that you are unlikely to achieve the financial independence and personal wealth you want, unless you make saving a regular monthly habit.
2. Get Started!
Statistics show that the average person works for 40 years, from age 20 to age 60. This means that the average adult only has 480 months (40 years times 12 months) in which a salary is earned. The sooner you start, the more you save, and the more opportunity you have to save. And, the easier the habit becomes. You Can’t Win, If You Don’t Begin!
3. Get Motivated
Psychological studies confirm that the successful people had to use the secret of LEVERAGE on themselves before they were motivated to start saving.
In almost all cases they created a future scenario of immense PAIN or intense PLEASURE to kick-start themselves into the habit of savings.
For instance, imagine yourself sitting with your family 10 years into the future, and you’ve just been told that you’ve lost your job! Can you imagine the pain you would feel when you have to tell them that you’ve got no money saved.
Can you see your kids digging in dirtbins trying to find a scrap of bread to bring home for the family. How do you feel?
It won’t happen to you? Ha! There are currently 4 million unemployed adults in S.A. and it’s getting worse. What if it does happen to you? Can you feel the pain? Will you start saving now? Create the crisis in your mind now and plan to overcome it.
Let’s add to this motivation. Imagine, again, sitting with your family in 10 years time discussing a dream trip to Disneyworld – or where-ever takes your fancy. Can you see the delight on your kids faces as they plan their trip through Epcot Centre, as they learn about the World of Tomorrow, and lunch with Mickey and Minnie on a paddle-steamer?
Imagine spending a night on Pleasure Island – Disney’s non-stop New Year’s Eve Party every night – with your spouse. Can you get started now? We did. We went. We’re hooked! And we’re saving for our next Dream trip. What will give you great pleasure when you come to use your savings?
4. Get Your Money To Multiply Miraculously
Perhaps the greatest secret of wealth creation is that of harnessing the miraculous Power of Compound Interest.
The secret of Compound Interest involves the simple Law of Multiplication. This law was put to good use by the Chinese mathematician who invented chess.
The story goes that the Emperor of that dynasty was so impressed with the game that he wanted to reward the mathematician.
He, a man of simple needs, declined any material reward at first. But when pressed to accept a gift, he suggested that the Emperor should place a grain of rice on the first square of his chess board, two on the second, four on the third, eight on the fourth, and doubling up on each square of the 64 square board.
The Emperor laughed at such a simple request. But when he tried to deliver his promised gift, it cost him his throne because there was not enough rice in China to fill the board. Beware the Law of Multiplication if you don’t understand it! For it’s secret is – it Starts Slow To End BIG!
Take, for instance, a savings of R150 at 18.5% interest per annum. In the first month this earns the paltry sum of R2,31. At the end of 12 months the total savings will be R1 990,98. No great shakes yet, huh?
Keep it up for 10 years and it will be worth a fair R64 557,63. Anyone impress-ed yet? After 20 years, it’s worth R378 605. After 30 years you’ve earned a whole R2 389 197 (Yes, R2 Million). And after 40 years you have a grand total of R15 Million and more! Is anybody listening?
Another great example I’ve seen, demonstrating this unique power, is that of the investor who saves R1000 a year at just 8% per year in real terms (ie. after adjusting for inflation). He starts at the age of 19 and only invests for 9 years, leaving the money com-pounding thereafter until age 65. As he stops contributing at age 28, his twin brother starts saving R1000 a year for every year until age 65.
Who saves the most?
The one who saved for only 9 years and left the Compound Interest to do it’s work for the next 37 years, saved a total of R251 191. The brother who saved every year from age 28, for 37 years, saved R237 941. Yes, R20 000 less than his brother who saved for only 9 years! Incredible isn’t it?
The moral of the story is, the sooner you begin to save regularly the greater the benefit you get from the Power of Compound Interest. Start now!
5. Get Growing With A Monthly Investment You Can Trust
Oh, how the Wise Ancients would have loved to have lived in our times. To be blessed with the gift of an investment medium such as the UNIT TRUST.
“Seek ye the advice of men wise in the handling of alms” has been their sage advice throughout the ages.
The Unit Trust industry offers exactly that, and more, to even the smallest investor with as little as R25 to R50 a month to save!
What Is A Unit Trust?
A Unit Trust is a simple and convenient way in which a small investor can invest in the most prestigious companies on the Johannesburg Stock Exchange (JSE).
You are assured of full-time professional management of your investment, without any of the administrative hassles of trading, including not having the worry of trying to work out when to buy and when to sell individual company’s shares.
The relatively small costs are sometimes really too embarrassing to even think about, considering the vast expertise purchased and the incredible past performance of these funds. Which, in general, are well above inflation, and in many cases have exceeded 20% per annum and more for the last 10 years, or so. (Remember how the R150 at 18.5% grew amazingly to well over R15 Million.)
A Unit Trust investment incorporates all of the great secrets of wealth-building. You can invest in regular monthly contributions, plus you can get started immediately with a simple debit-order facility or lump-sum deposit.
And, you are always advised to leave your money invested in Unit Trusts for the Medium-term to Long-term (3 to 5 years and longer). This takes maximum advantage of the Power of Compound Interest (remem-ber those past returns of 20% per annum and more) and takes into account any short-term fluctuations in the Stock-market. History has shown that, for most people, a long-term holding program is far more profitable than frequent buying and selling.
And, of course, a Unit Trust investment is the finest way of spreading your risk amongst a large number of Blue-Chip companies. So all of your eggs are not placed in one basket.
Now, hold on to your hat. Did you know that the returns on your Unit Trust investment are almost totally tax-free? That’s right, because only your interest income is taxed, and not your dividend income or capital growth – which is by far the largest portion of the returns you will receive. Roughly only one-tenth or less of the total return of a Unit Trust is taxable. This makes it a great tax shelter for the average man in the street.
Sanlam’s Million Rand Plan.
Sanlam, in their glossy promotional literature, include an article by Hein Swart ; Die Burger 25 July 1994 entitled “Be A Millionaire In Just 25 Years.”
He writes, “… in South Africa there is no better way (of beating inflation ) than by investing in shares. The average long-term yield on this form of investment has been about 23% a year – a full 10% higher than the inflation rate.”
He continues. “At the current rate of return on the Johannesburg Stock Exchange, an amount of R100 a month will be worth R1 379 in a year’s time if it is invested in one of the general Unit Trusts and the dividends are re-invested.”
“After three years your investment nest-egg could be worth R4 850, and worth R9 610 after five years. The investor who persists for seven years will be worth a neat R17 460 in his account at this rate.
After ten years this will be worth R41 258, and after 20 years he will have a whopping R540 205.”
“And if you keep on investing like this for 25 years, you could end up with a small fortune of R1 022 742.”
‘There is surely no better way of becoming a Millionaire within 25 years!’
How R100 Per Month Turned Into Almost R120 000 In 15 Years At Sage
Sage Unit Trusts, in their promotional literature, say: “YES! It’s a fact. If you had invested R100 per month in Sage Fund for the past Fifteen years, the R18 000 you invested would now be worth R119 418 – that’s an annual compound return of 22,5% against the average inflation rate of 14.4% for the same period.”
“Serious long-term investors know that it is always a good time to buy unit trusts. When the market is low, their regular investments buy more units. When the market rises, their increased holdings are worth considerably more.”
Each Financial Institution’s success stories go on and on! But, one thing is for sure if you don’t start you won’t get off the ground.
Don’t get too clever, don’t get too cute. If R50 a month is all you can start with right now, then don’t get overly con-cerned with analysing which is the “best” for you (even the experts don’t really know) – just select one of the recognisable institutions you’re familiar with and invest in their General Equity fund.
If you’re thinking of much larger sums on a monthly or lump-sum basis, then consult the financial experts in your area, and get the information on a wide range of funds before you make your final selection. But, contact My-Fin and something about it today!
Bibliography: Clason, George S. “The Richest Man In Babylon.” Penguin Books.
Cluver, Richard. “How To Make A Million.” Richard Cluver Investment Services.
Whittaker & Heystek. “Making Money Made Simple!” Struik.
Burkett, Larry. “Using Your Money Wisely” Moody Press Spring, Martin. “Money Book.” Prescon Publishing.