PDSnet Online Investment Course

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“The person who knows that he doesn’t know much, knows much”
(Marc Faber)
<h2>OBJECTIVE</h2>
The purpose of this course is to enable you to get started in the share market as quickly as possible, even if you have little or no knowledge of investment. We will take you through some of the most useful features of your software and show you how to use them to begin making good share selections and we will show you how to time your transactions for the best profits. We will explain how to open a stockbroking account and how to buy and sell shares for your own account. AA Understanding the share market is like learning a new language – the language of investment. In this section and in the notes that follow, we will introduce you to many new words and concepts that will help you to understand what is going on in the investment world and how to make the best choices. There is also a comprehensive <a href="/index.php/stock-market-glossary/">glossary</a> of stock market terms included with your software and available on our website to help you to become familiar with the language of investment. Any term which is underlined in these lecture modules (or in any of our publications) has a definition in the glossary which you can access by just clicking on the underlined term.
<h2>YOUR MOTIVATION</h2>
You need to make a commitment of your own. You need to spend a regular amount of time (say 30 minutes to begin with) each day studying the market, your investments and your goal of becoming rich by investing in shares. Without this commitment you will not be able to keep up with developments in the market and you will miss many golden opportunities. You will notice one important thing. Every time you are able to spend a regular amount of time each day studying the market you will almost always make money and whenever you are unable to do this you will almost always lose money. If you can find that half-an-hour a day to spend focusing on your goal of achieving financial independence, you will quickly find that time becomes the most profitable half-hour of your day. In time you will make more money in that half-hour than you do in the rest of your day put together. Imagine you are a tennis player trying to hit the ball while wearing a blindfold – your chances of picking good shares and timing your transactions for the best profit without watching and following the market every day are about the same. The simple truth is…
You cannot hit the ball unless you are watching it!
 
You should ask yourself this question: Why did I invest in this program? This is an important question, and one which you should consider very carefully. Basically, you have bought this course because you want to achieve financial independence. But what does that mean? At the moment, the high probability is that at least 90% or more of your monthly income comes from your salary. In other words, you are exchanging a great deal of your time for money on a regular basis. This is even more true if you run your own business. Very few people receive more than 10% of their income from their investments. Achieving financial independence means reversing these percentages – so that, ultimately, 90% of your monthly income comes from your investments and your salary amounts to just 10% or less – if you are still working! If you think about it, you will realise that, in the end, when you retire, most if not all of your income will have to come from your investments. So achieving financial independence is really a question of how early you can afford to retire – or at least it is about having the choice to retire early if you want to. Exactly how early will depend on how effective you are – and that in turn will depend on how effectively you can master this course. We define the first level of financial independence as the point at which the income from your investments is equal to your salary. Our calculations have shown that if you can save 10% of your gross income – and then invest the resulting capital effectively you should reach that first level of financial independence in about 10 years. If you understand computer spreadsheets such as “Excel” you can easily set up a model to establish the time that it will take you to reach financial independence at various percentage savings levels. Or you can go to our <a href="/index.php/financial-freedom-calculator/">PDSnet Financial Freedom Calculator</a>, which will do this for you. In this life, there are basically only two ways to make money….
 
<ol>
<li>You can work for it, or</li>
<li>You can make your money work for you.</li>
</ol>
 
…and it is an unassailable fact that nobody has ever become rich by working for a salary. Your employer would be foolish if he paid you more than just enough to keep you sitting behind your desk. So your salary will always be pitched to just keep pace with your immediate financial needs and aspirations – but it will never make you rich. To get rich you need to get your money working for you. Think about it this way: Every R100 note that passes through your hands could be your servant for life – it could work for you for the rest of your life! And then it could go on to work for your children and grandchildren. But it will only do this if you choose to save it rather than spend it. Essentially, you need to develop two habits to achieve financial independence:
 
<ol>
<li>A regular monthly savings habit. This means saving roughly 10% of your gross monthly income as “forever” savings (i.e. money that makes money – and that you will never spend).</li>
<li>The habit of spending a regular amount of time (half an hour per day is sufficient to begin with) thinking about and working towards your goal of financial independence.</li>
</ol>
 
If you can acquire these two habits, it is a certainty that you will achieve financial independence – and if you cannot, then financial independence will almost certainly elude you. Statistics show that only one person in a hundred ends up rich. But, this is a choice that only you can make. A savings habit can be easily put in place by arranging a stop-order from your bank account, but you must make sure that it is a genuine saving. In other words, it is no use saving money on the one hand while you sink deeper into debt on the other It will help to draw up a statement of your income and expenses – which accurately reflects your monthly position. Then adjust your expenses (or your income, if you can) to meet your goal of saving 10%. This requires you to maintain an effective month-to-month budget.
<h2>BUDGETING</h2>
What follows in this section is a very simple method that you can use to establish and maintain a monthly budget that will ensure that you spend less than you bring in and can save regularly and consistently.
This can be done by hand on a piece of paper or, more easily, in a spreadsheet, like Excel. To implement this budget, you do not need to wait until pay-day. You can and should begin immediately. Follow the steps…
<h3>Step 1</h3>
Begin with your current bank balance. If you have cell-phone banking it should be very easy to find out exactly what your current available balance is at the bank right now. It must be your current available balance, because that is what you have after all your purchases up to this moment have been taken into account. Once you have your current available balance, add to it whatever cash you have in your wallet or purse. We suggest that, to keep it simple and easy, you do not bother with your coins – just the notes. Next, add in any additional money which you might be getting between now and your next pay-day. The total of this, then, is what you have to meet all your expenses and to save until your next pay-day.
<h3>Step 2</h3>
Work out how many days (including weekends etc.) until your next pay-day. Usually this is easy to do with a calendar (like the one on your computer or phone).
<h3>Step 3</h3>
Try to think of any expenses (including any account payments and credit card payments) which you may have to pay between now and pay-day – like petrol for your car, dog food, or maybe a birthday present that you will have to buy.
<h3>Step 4</h3>
Now subtract these once off-expenses (Step 3) from your total available cash (Step1) and divide whatever is left by the number of days until your next pay day. That will show you how much you have, to either spend or save each day, until your next pay-day.
<h3>Step 5</h3>
Now you are in a position to think about how much you can or want to save before your next pay-day. One way to do that is to just include the amount you want to save with your other once-off expenses (Step 3). On pay-day you begin your budget again – this time working until your next pay-day (which should be about 1 month away). Mostly this means that you will have 28, 29, 30 or 31 days in your budget. Begin by paying all your month-end expenses (like your rent, the minimums of your credit cards and trade accounts). Then follow the same procedure. Deduct all the expenses which you know you will have during the rest of the month – and include among these whatever you want to save. Then divide the balance by the remaining days until your next pay-day to get what you can spend each day until then.
If you spend less than this amount on any day, then you will have more available for the other days. 
<h2>DEBT</h2>
Of course, most people have some debt – credit cards, trade accounts (like with a clothing shop, chemist or elsewhere) and maybe an overdraft or loan from the bank. If you have some debt, then you should first make it your business to pay off that debt before you begin saving. Paying off debt is a type of saving, and just like saving it will bring you closer to your goal of achieving financial independence.  We believe that the only debt you should have is the mortgage bond on your house, because that debt is backed by a solid asset and the interest on it is the lowest you will pay on any debt. All other debt is expensive (in terms of the interest you have to pay on it) and should be eliminated (perhaps by paying it off from your bond). So then, if you have debt, whatever you can save should be directed to paying your debts off one at a time until you are debt-free.
<h2>CAPITAL BASE</h2>
Once you are out of debt you can begin to use your savings to build a “capital base”. A capital base is money that you invest in the share market so that it can make more money. The larger your capital base, the closer you will be to your goal of Financial Independence.
<h2>WINDFALLS</h2>
From time to time everyone gets money which they were not expecting. It’s very nice when it happens and the temptation is to splurge the money on luxuries. But these windfalls are very important because they can accelerate your progress towards your goal of financial independence – but they will only do that if you save them or use them to pay off debt.
<h2>STOCKBROKING ACCOUNT</h2>
A good idea is to open an account with a stockbroking firm and save your money directly into that account every month. Stockbroking accounts pay the JSE at-call interest rate which is close to the best interest rate available. Then once you are debt-free, and have saved more than R10 000, you can choose your first share to buy. A stockbroking account can be accessed online, and opened quite quickly by phoning the institution of your choice and emailing through all required documents. A list of well know institutions which offer this include:
<ol>
<li>PSG Online</li>
<li>Standard Bank</li>
<li>Sanlam</li>
</ol>
<h2>REGULAR HABIT</h2>
Spending a regular time each day (remember, Saturday and Sunday are days!) on studying your financial goals and how to achieve them is not easy, but the rewards of achieving financial independence make it well worthwhile. In general, the only way to do this is to get up half an hour earlier in the morning, because this is the only time that you can actually control – the rest of your day is subject to interruptions and unforeseen events, but in the early morning the phone does not ring and your family is still asleep – so you can really concentrate, uninterrupted. Remember, if you do not set goals for yourself in this life, then you will inevitably end up following the goals of other people (like your employer, or the advertisers on TV, your spouse etc.). Take the bull by the horns right now and make a commitment to spend that half an hour each day on this important goal.
<h2>BUYING SHARES IS THE FASTEST ROUTE TO WEALTH</h2>
Numerous studies show that investing in the share market is the fastest route to wealth creation over the long term. One study over 40 years shows that R1000 invested in a fixed long-term deposit in a bank would have been worth R45 901 forty years later. That same R1 000 invested in a spread of shares (i.e. those shares making up the JSE All Share index) at the same time would have been worth R843 703 — more than 18 times the return on fixed deposits! And, by taking advantage of share cycles, this performance could have been substantially better. It is also true that blue chip shares on the JSE have doubled their value roughly every 4,5 years for the past 30 years. Consider the following 18.5-year chart of the share Naspers:
<figure class="figure"><img src="http://www.pdsnet.co.za/onlinecourse/images/Naspers.PNG" /> 
<figcaption class="figure-caption">Santam (SNT) February 1985 to November 2020 - Chart by ShareFriend Pro</figcaption>
</figure>
Here, you can see that the chart shows that Naspers was 1230c on 28th March 2002 and 18,5 years later on 6th November 2020 it was 344308c – a growth of  279-fold over a period of 18,5 years. You will notice that this long period includes the 2008 sub-prime crisis and the nine years of Zuma/Gupta state capture. Despite all of that, the share has still gone up 279-fold. During this period the share also paid out dividends to its shareholders every year. Obviously, not all shares perform like this, but the fact of the matter is that R1000 invested in Naspers at the start of this period would have been worth R279925 by the end! And this growth excludes the after-tax dividends which the company paid out to shareholders over that period: So you can see that investing in the share market can be extremely lucrative – it just requires you to be patient and diligent.
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