Your
investment building blocks
Your dream lifestyle, debt-free, travel… You know
what you want, but how will you get it? Consider these six steps
to help
you on your investment journey.
Start
small
Few millionaires are born millionaires.
Everyone starts
somewhere, even from a smaller initial savings
amount.
This means that anyone can start creating more
wealth,
at any time, with any amount.
Start early
Even if you start small, take advantage
of the long term
and compounding to grow your investment. The more time
you have, the more you can take advantage of long term
returns, which tend to produce higher returns than the
short term.
Regardless of when you decide to start your investment plan, half the battle might just be making sure you start - you can’t create savings by doing nothing at all.
Invest, not obsessed
For many people it can be inefficient and ineffective to
check on the price of each investment every day. This is
because good quality investments will tend to perform
better over the long term, so short term market movements
might just become a cause for concern or incentive to
react recklessly.
If you focus on the market ups and downs (which aren’t
unusual) and then you jump in and out of the market to ‘fix’
your investment, you could end up paying a series of fees
and taxes that will erode your savings and returns. As
a
result, you could miss out on long term gains – gains that
other investors would receive with much less effort.
For many people it might be better to only check your
investment progress every now and again with your
adviser, with more or fewer reviews depending on your
goals and timeframe.
Regular as clockwork
If you invest regularly you may decrease your exposure
to market risk. For example, by automatically investing
a fixed amount each month, you will buy more assets
when prices are low and less assets when prices are high.
Therefore, while you would otherwise have to try to ‘time’
the market, dollar cost averaging aims to reduce overall
cost as well as the risk of market guess-work. Speak to
your adviser for more information and to see if this is
a
good strategy for your situation.
Save for today, and tomorrow, and
the next day…
Money is a part of everyday life, and the steps you take
in the short term do make a difference to your long term
savings and future goals such as a comfortable retirement.
Short term savings can also be ideal for emergencies
and unplanned expenses, with six months salary a good
amount to have easily available, perhaps in a high interest
cash account.
Don’t forget about goals that fit in between now and
retirement. These ‘medium term’ goals over the next
5 to
15 years might include a holiday, a new car, renovations,
or school expenses. Speak to your adviser about
preparing for these goals with investments like managed
funds and shares.
Know what you’re doing
If you do not know why, how or what you’re investing in,
then the best thing you can do for your savings is to get
a professional opinion first.
Not only will you benefit from your adviser’s training
and industry knowledge, you will have the opportunity to
invest more successfully in line with your personal goals
and budget.
We might want good returns immediately, but the reality is that good investments tend to favour the long term. Fortunately the steps you take now can help you get there faster and more successfully. Contact your adviser to review or discuss your goals, and to understand the time frame you ’ll need to reach your goals successfully.
 Next: Margin lending in a volatile market |
22 August, 2008->->
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