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Trends In Investing For Entrepreneurs In South Africa

To help new entrepreneurs, including those who live or work in South Africa, this is a list of some of the latest trends in investments.

Jeff Broth

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When entrepreneurs have excess cash, they look for ways to invest it. Most of them believe in diversified portfolios. But new investors might not know what they can choose for their portfolios.

That’s why it’s important to read binary options reviews and listen to financial advisors. Financial experts are there to help you find out your best option of where to put your money.

Related: Want to Get Rich? Know How to Diversify Your Investments

Moody's RCA property graph

Real Estate

According to Seeking Alpha, foreign investment in commercial real estate is increasing at a great rate. Foreign investors represent almost 20 percent of the total commercial real estate sales volume in the United States.

Buying property here is attractive to South Africans and other entrepreneurs because the U.S. economy is strong and stable compared to other countries around the world.

Transactions are more visible in the United States unlike other countries. Investors are drawn to high capital returns on their investments and low interest rates.

While they are buying in New York, Washington and Los Angeles, secondary markets, such as Denver, are also attractive to foreign entrepreneur investors.

Mutual Funds

Investors always like mutual funds. However, picking the right mutual fund requires expertise in the field, but you can start with funds that offer a little bit of everything.

If you want blue chip stocks, utilities, companies that are on the verge of skyrocketing, some risky ventures, some bonds and more diversity. Ask your advisor for help in picking the right mutual fund.

Exchange-Traded Funds

The Journal of Financial Planning reported that exchange-traded funds have surpassed mutual funds in popularity. About 80 percent of financial advisors polled use or recommend ETFs for their clients as an investment strategy.

ETFs have increased in popularity since 2006 as an investment that will produce high returns. In 2006, only 40 percent of surveyed financial planners recommended ETFs.

Investors trade in ETFs because they are inexpensive, offer tax efficiency, offer flexibility in trading, show transparency in holdings, and allow for diversification. Because you can purchase ETFs online, foreign investors and South African entrepreneurs are attracted to them. Like mutual funds, you can make a lot of money investing in ETFs.

Related: Enko Education Investments Matches Money With Passion

Stocks

Despite news of stock market downturns, investing in stocks remains a viable investment option for entrepreneurs.

Over the long-term, stocks go up and down, but they provide strong earnings if you don’t panic when the stocks drop. However, you want to avoid stocks that have consistently stayed low. These aren’t likely to climb again, experts say.

Look for stocks that are more like the tortoise in the Hare and Tortoise fable. The stocks that consistently increase without huge variations are more likely to net you huge gains. Also, don’t jump into selling off your stocks when the market crashes or your stocks drop. When the market crashes, buy some bargains. When your stocks drop, hold them to see what happens a year later.

Market realist

Commodities

There are many good options including oil and gold. These are among the two most commonly traded commodities. This is mainly because other commodities take skills to invest, but when you invest in them correctly, you will gain significant money from your investment.

Oil prices are currently low; however, if you invest in oil, you can expect a turnaround in the near future. The price of oil won’t stay low forever. If you buy gold coins or bullion, your investment will always be worth something. Many investors buy gold bullion to hedge against problems with other investments.

Binary Options

Binary options will net you either a fixed monetary amount or nothing at all. You can invest in the asset-or-nothing or the cash-or-nothing type of binary options.

Related: Is Search Marketing Still Worth Investing In?

To understand how binary options work, you should speak to a binary broker who can help you with your investment. Binary options have become popular in the last few years and are growing in popularity because they are low cost to both the entrepreneur and the trader.

They have also garnered respectability for investors. When you invest, you purchase the options on stocks, commodities, indexes, foreign exchange and other derivatives. If you bet on your option correctly, you receive the fixed amount, making them lucrative for investors.

These are some of the current trends in investing in SA. If you’re looking for ways to make money, you should pick one of these options.

Jeff Broth, a business writer and advisor. Consulted for SMB owners and entrepreneurs for 7 years now. Mainly covering finance, stocks and emerging fintech trends.

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Cash Flow

The Simple Way To Pay Wages When Your Staff Don’t Have Bank Accounts

If you have employed casual workers over the busy season, you can pay wages even if they do not have bank accounts.

Absa

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At Absa Business Banking, the things that are important to you are just as important to us. We understand your business needs, which is why we have developed tailored solutions to help you where it counts. Take CashSend Plus, for example. It is a payment solution that enables you to pay workers even if they do not have bank accounts.

Related: Hiring Your First Employee? 5 Things You Need To Know

It is safe and secure

Your employee will receive a six-digit access code and a ten-digit reference number, so that they can verify the transaction. The money is instantly available at an Absa ATM.

You can even pay yourself

We have all lost bank cards or wallets at some point in our lives. What an inconvenience. Well, it is good to know then that you can access cash by sending it to yourself. Now, that is what we call better. 

Related: How Salary Transparency Empowers Employees – And When Not To Use It

Interested?

Please speak to one of our consultants or call 0860 111 123 or visit your nearest branch.

Absa Business Banking 

Do better business. Prosper.

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Entrepreneurial Balancing Acts with Debt

Young South African entrepreneurs face many challenges when it comes to debt-related financing. Small and medium enterprise (SME) owners typically require extensive debt financing from bank and non-bank lenders.

Harald Merckel

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Young South African entrepreneurs face many challenges when it comes to debt-related financing. Small and medium enterprise (SME) owners typically require extensive debt financing from bank and non-bank lenders. Unfortunately, many South African entrepreneurs are limited in their ability to access capital markets. Among others, the major challenges facing entrepreneurs include lack of credit history, no collateral, shaky credentials, and unformulated business plans.

Regardless, SA entrepreneurs are forging ahead and using multiple resources at their disposal such as payday loan providers, non-bank lenders, family and friends, crowdfunding and other economic empowerment initiatives to raise the necessary seed capital for investment purposes. Given the staggering unemployment rate in the country (+25%), the only way out for many people appears to be entrepreneurship. The 2008 global financial crisis threw the economy for a loop, and now the hopes and dreams of many South Africans hang in the balance.

Related: Every Tough Choice Has Management Debt – Are You Accounting For Yours?

ISM Study Sheds Light on SA Entrepreneurial Pros and Cons

An intensive study conducted by the University of Cape Town’s Unilever Institute of Strategic Marketing (ISM) found that the country is experiencing ‘a crisis of aspiration’. Simply put, many South Africans are struggling to attain their career objectives in an economy that has been ravaged by corruption, mismanagement, and scandal. Despite tough economic times, South African entrepreneurs are determined to try their luck. Pressing challenges in the form of rising unemployment, and an economy mired in failure are challenging entrepreneurs to be more inventive than ever before. The most volatile component of the economic spectrum in South Africa is the middle class.

Many South African families have lived the high life, or ascended the rungs and then been knocked down a peg. This instability is creating added volatility in a country where high crime, mismanagement and political rancour pepper the scene. For many entrepreneurs, any access to credit is a godsend. Banks and non-bank providers offering personal loans, business loans, or credit card funds invariably expose themselves to debt default. For entrepreneurs, it’s important to know where to draw the line. Access to lines of credit in a crippled economy is significantly more valuable than the equivalent access in a developed economy.

How to Know when you are Overstretched as an Entrepreneur

Debt is considered a prerequisite for investment purposes. Most South Africans simply don’t have the necessary capital to start up a high-tech venture, fund a new business, or conduct marketing and advertising activity. As such, lines of credit are increasingly being used to propel business activity among SMEs – both in the formal and the informal sector. However, once debt reaches untenable levels, the tough questions need to be asked. For example, if multiple loans and multiple payments are required monthly, revenue streams need to be evaluated against expenses to gauge whether this is a feasible status quo.

Related: How To Handle Your Post-Holiday Debt

Many entrepreneurs find it difficult to manage multiple loans simultaneously, although it is necessary to acquire the capital from multiple sources. One of the ways to deal with these types of exigencies is a single loan from a low-cost lender in the form of debt consolidation loans. Simply put, these loans are provided by bank or non-bank lenders at lower interest rates than the prevailing interest rate on other lines of credit. By taking out a debt consolidation loan, the entrepreneur has more disposable income over time by not paying the higher interest on credit card debt.

Escape Debt Before Debt Consumes You

There are several other ways to know when your personal financial situation has reached critical mass. For starters, the nature of your business may require you to continue dipping into lines of credit to maintain business operations. If you don’t have the requisite discipline to stop indebting yourself, you may not be able to get out of debt. Debt consolidation is only effective insofar as you have the necessary discipline to put an end to debt financing of all business-related activity.

Credit should be used sparingly, and profits should be generated to allow your business to prosper. In a tight economic climate, costs are the bugbear that need to be attacked. Lavish trappings are unnecessary for business functionality – modest budgets, and high-quality goods and services are far more effective than window dressing at a premium.

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How South Africa’s Small Businesses Plan To Invest Their Money In 2018

Here are their five areas they should focus their attention on in the next year and beyond.

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Despite economic uncertainty, South Africa’s small businesses are positive about the future. In fact, our State of South African Small Business report reveals that 40% of small businesses are expecting to grow. However, to achieve growth without overextending their limited resources, small businesses need to invest wisely.

Here are their five areas they should focus their attention on in the next year and beyond.

Marketing

When times are tight, companies typically reduce their marketing spend. This isn’t the case for 36% of South Africa’s small businesses. These respondents recognise marketing as a critical investment area.

They’d rather make a concerted effort to grow their customer base, than sit still and do nothing as consumer demand declines.

Related: What To Consider When Investing Your (Hard-Earned) Money

Technology

Without access to the latest technology, business growth can quickly stagnate. This is why 23% of South Africa’s small businesses plan to invest in up to date equipment, whether that be new machinery, mobile devices or computers.

The right investment in this area can give a business a real competitive advantage.

It can help boost profits and improve operational efficiency – both of which can help a small business withstand difficult economic conditions with greater success.

Product development

Consumers are spoiled for choice. Their needs are constantly changing and companies can’t afford to become complacent. To keep up with market demands, 22% of small businesses plan to invest in product development. Barring a few timeless classics, most products need a regular review and tweak to stay relevant and popular.

Technology

technology-south-africa

Digitisation is transforming business functions across the board. Technologies, like cloud software can take care of laborious administrative work.

Related: How To Make Money Investing, According To Ashton Kutcher

This liberates employees from time-consuming tasks, enabling them to focus on more strategic work like customer retention and acquisition.

Technology has the power to improve productivity and efficiency. Which is why 18% of small businesses are going to focus their investment plans on this area of their businesses.

Customer service

The customer should always be the priority. It doesn’t matter how good a product is, if there are no customers, then there’s no business. As competition increases, the user experience becomes more and more important to win over customers.

Business growth depends on happy customers and to achieve that, 18% of small businesses plan to invest in delivering better service.

All five of the above business areas are worthy investment focuses. The question is, how does a small business work out what to invest where? The only way it can invest effectively is with a full view of its company finances. A small business needs to be able to see which functions have provided the best return on investment to date.

Related: 12 Millionaire Habits To Start Making Serious Money Soon And Build Wealth In A Hurry

It also needs to consider how much investment capital it has to spend. What’s more, before it makes an investment in say, marketing or product development, it must know exactly how and where the money needs to go.

The right software can help a small business access the real-time insights it needs to make better, faster financial decisions. To combat increased competition and market uncertainty, South Africa’s small business owners need access to up-to-the minute information from any device no matter where they are. An informed investment has the greatest chance of success.

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