Seven investment questions you're too embarrassed to ask

Investing can be simple, but it's only natural to feel embarrassed when asking questions about the basics. Does this sound like you? We've got answers for some of the most common questions asked by novice investors.

1. How should I start investing if I don't have a lot of money?

Don't worry, there are a variety of low cost investment options available even if you have limited funds. There are low-cost index funds or exchange- traded funds (ETFs) available that offer diversification across a broad range of assets. Many investing platforms also offer fractional shares, which let you to buy a portion of a share rather than a whole share. This makes it easier to invest with small amounts of money.

2. Is there a minimum amount that I can invest?

You can technically buy shares in a company for as little as a few rands if that's how much the shares currently cost on the Johannesburg Stock Exchange (JSE). Just remember that you'll still have to pay admin fees for your investment, so too small a contribution amount won't work in your favour.

It's best to start by researching the investments you're interested in or asking a financial adviser about suitable investments with no or low minimum balance requirements.

3. What is a unit trust?

A unit trust is a type of collective investment scheme that pools money from many investors to purchase a diversified portfolio of securities such as equities, bonds, property and other assets. Each investor in the unit trust owns units, which represent a portion of the holdings of the trust.

Unit trusts are run by fund managers who invest your money in different asset classes. This is a great option for investors because you get the benefit of being exposed to various assets without the pressure of choosing them yourself.

4. What's the difference between shares, equities and bonds?

When you buy shares - which are also known as equities - you buy a part of a company. Shares represent ownership in a company and come with the potential for high returns and higher risk.

Bonds are debt securities issued by governments or corporations to raise capital. When you buy a bond, you are essentially lending them money in exchange for periodic interest payments and the return of the bond's face value when it matures. Bonds are generally less risky than shares but offer lower returns.

5. Can I cash out my investments whenever I want?

This depends on your specific investment. Unit trusts are generally accessible at any time or with a few days' notice. Some investments require a month's notice for you to withdraw funds. Many retirement annuities only pay out once you turn 55. Endowment policies tend to pay out after a certain number of years have passed.

Sometimes, early withdrawals come at a price. It's best to check the terms of your particular investment to ensure you avoid any penalties and speak to your financial adviser about what the best strategy for cashing out might be.

6. How do I know if I'm ready to invest?

Before you start investing, ensure that you have a stable financial foundation. Here are a few steps to consider:

• Emergency fund: Have an emergency fund in place with at least three to six months' worth of living expenses saved in a readily accessible account.
• Debt management: Ensure you have a plan to manage and pay off high interest debt, such as credit card debt.
• Budgeting: Create a budget to track your income and expenses, ensuring you have a clear understanding of your financial situation.
• Financial goals: Define your financial goals, such as saving for retirement, buying a home or funding education, and develop an investment plan that aligns with these goals.

Starting with these foundational steps will help ensure that you are financially prepared to begin your investment journey.

7. Do I really need a financial adviser?

The short answer? Likely, yes! It's a big responsibility to handle your investments without professional guidance. That's because it requires a lot of research, learning, objectivity and discipline.

A financial adviser can lighten your load by handling your investments with expertise and a level head. An open and honest relationship with a financial adviser can make a world of difference to your portfolio.