It's wise to invest your annual bonus

Thuli Zungu Consumer Line
Investing for the first time can seem daunting and overwhelming but should be an exciting and empowering experience. /Kevin Sutherland
Investing for the first time can seem daunting and overwhelming but should be an exciting and empowering experience. /Kevin Sutherland

It's that time of the year when many employees will be paid their annual bonuses.

Some, however, will blow it on gifts and holidays instead of growing it.

Mellony Ramalho, an executive of sales and branch network at African Bank, said it's wise to invest your bonus.

Investing is not just for the rich as people don't need large amounts to start investing, she said. "You only need to understand some basic concepts and principles relating to investing," Ramalho said.

Investing for the first time can seem daunting and overwhelming, but should be an exciting and empowering experience, she said.

"There's nothing more thrilling than putting your money into a product knowing you're going to see it grow over time," Ramalho said.

She said investing was easier for those getting bonuses for the first time. "If it's your first time, there are many people out there who have been investing for years. So don't be afraid to ask questions and compare various products," she said

Ramalho said the key was finding the product that meets your objectives - how much you want to invest, what kind of returns you want to see and the time period of your investment.

She said there was a difference between savings and investment accounts.

Savings are low-risk funds that must be available when you need them, while an investment is an account held for the purpose of wealth building and should not be needed for many years.

In other words, it is an account which is used to grow your money. If you want to save for something in the long-term, you may choose to invest your money rather than put it into a general savings account, she said

Then there's risk. Investments involve greater risk, but yield greater returns when left long enough to ride out the turbulence of the stock market.

"The higher the risk, the higher the potential return while the lower the risk, the lower the potential return."

There are various options when it comes to accessing your funds.

A notice deposit account, for example, is a short-term investment product where you can withdraw your investment, giving a notice period of seven, 32 or 90 days, said Ramalho.

Then there's a fixed deposit account where the length of the investment is set at either three, six, 12, 24 or 60 months.

"Other examples include access accumulator and tax-free investment accounts where partial or full notice can be placed during an access period," she said.

Once you've decided to invest, it's important to do an overall assessment of your expenses to determine how much you can top up on your investment every month.