Investing for Beginners

By Jason Fittler

You have made the decision that you need your money to work harder than you do!

It is time to start investing and ride the gravy train everyone else seems on.

So where do you start?

1. Do you attend a seminar on how to get rich?

2. Should you speak to that friend who is always telling you how well they are doing?

3. Is there someone you know who is highly successful and has plenty of money, surely they can give you some good advice?

4. How about speaking to a financial adviser of a major bank, surely they will get it right?

Who do you trust? How do you know if you are getting the right advice?

Most people simply just take a leap of faith. Many are burnt and lose money first time out never to return.

The problem being is that investments are just like anything else you might buy. They are products you are being sold, which means most of the time you are speaking to a salesperson.

Do you remember the investment that you lost money on? Did it stop you investing again? For many I suspect it was a hot tip from a friend or trusted source. This turned out to be the worst advice you have ever received.

However, instead of blaming the source of the advice most people tend to blame the investment. This is common in the share market, as most first-time investors do not get the right advice at the start.

I blame this on the fact that it is easy to access the share market; you can invest small amounts, and everyone thinks they are an expert.

Few investment advisers truly understand how complex the share market is and how to navigate it.

What is also true is, used correctly; you can create wealth with reduced risk and without having to borrow large amounts of money. It is called compounding returns.

So listen up and I will share with you the key to creating wealth and I will give it free!

1. Regular savings – the first and most important is you need to save and start now if you have not already. Savings is about putting away money now so that in the future you can draw down on this money to live, so you no longer have to work. Sound good?

2. Do not invest money that you need now – investment returns are higher if you invest over the long-term. This is due to the volatility (ups and downs) in the market. You have to have a longer investment time frame to give you the best chance of riding out the lows and taking profits in the highs.

3. Diversification of risk – you cannot just buy one investment and hope for the best. You need to spread your risk across a number of investments. To do this, you need to work with your investment adviser.

4. Controlled gearing – borrowing to invest increases risk on a number of fronts. Any losses are magnified plus the fees, and interest you are paying to the bank will impact the overall return.

5. Control your tax payable – no one likes paying tax, so you need to have the right structure and advice to keep tax under control.

6. Make sure fees equal advice – most people are not aware but around 2/3 of the investment fees you pay go to the platform provider, not to your adviser. If you are in an industry super fund, then 100% of your fees go to the product provider. You get no advice.

7. Understand what you are investing in – make your investment adviser explains the investment clearly to you. Check with a third source to ensure your adviser knows what they are talking about.

8. Never panic – it is only money, you can make it back.

We are always here to help.