From the moment you
receive your first pay cheque, it's a smart move to start thinking about your
investment strategy. Because when it comes to investing, it’s true that the best
things come to those who wait, thanks to compound interest. Given enough time
compound interest means a single dollar could grow into thousands. It’s such a
powerful concept that Einstein himself called it the eighth wonder of the
world. So what are you waiting for? There’s no better time than the present -
start right here with 10 hot tips for young investors from our founder, Mark
“By the time you’re employed and receiving
superannuation, you have an opportunity to invest for your future. It can be
confusing and it shouldn’t be. So here’s 10 basics investment principles for
those aged 30 and under.
Time: time is your second-greatest asset, after the
ability to generate income. Time drives the compound effect, where returns on
your assets are added-in to your lump sum. $1,000 that’s earning five per cent
p.a. doubles in fourteen years thanks to compounding. If you’re a 25 year-old
woman, you have another 70 years of living and letting compound interest work
Investment: don’t confuse investment with saving. Investment is
developing an appreciating asset in the long term so it eventually generates
income. Saving is accumulating cash for short-term goals such as house deposit,
holiday, car and university fees.
Risk-Return: investing is a trade-off between risk and return,
so to get high returns you take more risk (of the value going up and down) in
assets such as shares. To ensure your returns, you have to stay invested for
the long term.
Risk profile: the most important aspect of your profile is age.
In your age group you have many decades to weather the ups and downs of share
markets, so you enjoy the gains. Your greatest risk is probably inflation,
which reduces the spending power of your cash by around 2.5 per cent each year.
Superannuation: super is not an asset class – it’s a tax-friendly
investment vehicle that will deliver an income for you in your post-working
years. Make sure you’re invested in super fund options that give you the best
chance of building a large nest egg.
Property: if you can’t buy where you want to live, buy an
affordable investment property and ensure it yields capital growth and income.
There are tax-planning factors in property so model the investment with an
Goal: always create your own goals. It makes it easier to
find the products, solutions and strategies relevant to you.
Advice: you don’t necessarily need full financial planning
to gain expert insight. Some advisers will deal with you on an hourly basis and
your super fund fees might include advice – use it!
Help: you don’t have to know everything. Try online apps
such as Acorns and Self Wealth, which have smart options, at low cost without
too much detail. To invest in shares without expertise, you can ‘buy’ the
market: managers have funds that track stock exchange indices and you can buy
exchange-traded funds (ETFs) that track indices of major stocks, such as the
Diversify: don’t place all your wealth in one asset, one asset
class or one industry. Don’t over weigh yourself with for instance property, or
mining shares – concentrated portfolios can fall faster and take longer to
never take your eyes off inflation – the quiet destroyer. You can overcome the
‘risk’ of shares going up and down, by using time. But if you become too
conservative and put all your money in cash, time allows inflation to win.”
Investing for the first
time can be scary - but don’t lose sight of the potential for huge gains. Not
to mention that shying away from investing can in the long term cost more than
taking a few calculated risks early on. Armed with the right information and
guidance it’s never too soon to start thinking about your future wealth
Call us today for a consolation