What every new investor should know

If you've just started working, it's tempting to spend your money on some of the things you've always wanted - material things, like a leather handbag or a set of golf clubs.

Smith has worked for Discovery Invest as an actuarial analyst for almost three years. Studying Actuarial Science gave him an understanding of various asset classes and their associated risk and return profiles, as well as the different investment vehicles available to investors.

Within reason, this is definitely part of the plan. But right from the day you get your first salary cheque, the biggest favour you can do yourself is to start saving and investing. The earlier you start making your money work for you, the better.

There are a few things you need to do before you make any decisions about saving and investing:

• Decide what you're saving for - it's good to have a saving goal.
• Find out more about savings and investment options and how they work.
• Put together a plan on how you can reach your financial goals.
• Choose an investment or savings plan that will help you realise your financial goals - and stick to what you've decided to do.

Some important things to keep in mind:

• Inflation, at around 6% per year, eats into your money. You need your investment to grow by at least that percentage, otherwise your money will be worth less and less over time. That's why stashing it under your mattress isn't an option.
• The goal of investing your money is to make it work for you by earning additional income or profit that you can use later, such as when you need to buy a house or retire.
• Compound interest, over time, will make it possible for you to earn money from an asset's reinvested earnings.

There are a few decisions you need to make before you decide where to save or invest your money. It depends on the costs of the investment (bank costs/broker,s fees), how quickly you may need to access this money, whether it's a long-term or short-term investment, and whether you can afford to take a risk or not.

There are four ways to invest your money:

• Equities (shares and stocks)
• Bonds (you lend money to a company or the government in return for a fixed amount of interest)
• Property (you can either buy a property or buy shares in a property company)
• Cash (a fixed-term money deposit that earns you interest)