When it comes to investing, it can feel like an endless maze of options – especially when you’re first starting out. With so many different decisions to make, it’s easy to get overwhelmed and confused about the best way to invest your savings.
To help navigate your way through the puzzle of investing, we’ve put together a list of important information to make sure you start out on the right foot.
1. Dip your toe in the water
One of the key ways to minimise investment risk is to start small until you get a feel for investment opportunities that work for you.
Start with a regular savings plan into a high-interest bank account or a managed fund and watch your money begin to grow.
2. Seek advice from friends or family
Speak to trusted friends or family members about their experience with investing and find out what has worked best for them. They may be able to connect you with a reputable expert or point you in the right direction of where to begin your research.
While in some circles it may seem like these sorts of conversations are “off-limits” more often than not those who have already experienced some success are more than happy to discuss it – but can feel a bit rude to bring it up unless they are asked first!
3. Set investment time frames
A great way to keep on track with your finances is to set realistic goals and be mindful of suitable investment time frames. When doing so, make sure you consider all aspects of your life and work out how much money you have to invest now, as well as any expenditure that may be required in the near future.
For example, if you are planning to buy a house or expect you may need to replace your car within the next two years, short-term investments may be your best bet. If not, you may be able to reap the rewards of a higher return from medium to long-term investments.
4. Think long-term
On the topic of long-term investments, once you feel you are ready for this kind of commitment, start doing your homework.
Generally speaking, long-term investments like shares tend to come with a far higher rate of growth than their shorter term counterparts, and while there are still a variety of low-risk options, many of these investment opportunities are based on keeping your cash locked up for a fixed term. So if for some reason you need to withdraw your investment, you could lose all the interest you have accumulated which is effectively lost income.
5. Understand that with high returns comes high risk
Wouldn’t it be nice to have had the foresight to invest in a company like Apple or Google? Unfortunately, there’s no fail-safe way to predict the next tech-giant, and the reality is that even the best investing practices aren’t going to turn you into an overnight millionaire. These things take time and patience, and of course, a healthy level of caution.
The investment options that offer the highest returns generally come with the highest risk, and managed funds can be a great option for inexperienced investors who are just starting out because you can tap-in to someone else’s expertise.
6. Have a healthy level of skepticism
As the old saying goes, if something sounds too good to be true, it probably is. This is certainly true for investing!
With any investment opportunity, it’s crucial that you do your own research before making any commitments. While there are laws in place to protect the consumer, there are tricks of the trade which often target the inexperienced investor.
Keep in mind that the most prolific advertisers are not always the best option, and if there’s one thing you take away from this post, let it be to always read the Product Disclosure Statement (PDS)!
For more information and expert advice on how to manage your investments, get in touch with one of our friendly financial experts at Rising Tide on 1300