Smart Thinking On Investing – May 21
Defining Your Investment Relationship
Entering into investing and the world of finance is a lot like online dating. Navigating through profiles, trying to work out what type of person you want to be with. Asking yourself: do I want to spend my life with someone spontaneous and thrilling to be around—all the time knowing you’re taking chances on their volatile and unpredictable behaviour? Or are you seeking someone more dependable and steadfast? Where you know there’ll be lifelong trust and results, but the ride may not be as exciting. Choosing an investment style you prefer is equally as difficult. Which is why I’m here to help you choose and DTR with your investment style.
The Real Risk is to do Nothing
- Investing is a long-term journey, setting off early and with a map—your financial plan—are equally important to get the most from compounding (earning interest on interest over time)
- The first step on your plan is to calculate your risk tolerance; everyone’s is different, but from there you can work out the best asset allocation to work for you
- Begin a systematic investment plan (SIP) to distribute a portion of your earnings each month over a calculated mix of edgier equity investments and low-risk debt portfolio assets based on your defined risk tolerance
Don’t be One of the 80%…
- …who aren’t investing yet. Statistics show 40% of generation Y believe they haven’t got the cash, 34% don’t know where to start and 13% blame student debt
- Overcome these misgivings and start now to avoid the danger of retiring without the necessary savings; be smart and invest now for your future self
- With a growing number of apps and digital investment advisors to ease the pain of making smart investment decisions now, there really is no reason not to get kick started with your financial future
Keep Your Wits About You
- You’ll be a better investor. Both seasoned and new investors need to keep their cool when the market takes a dramatic turn as it did in early 2016
- Money will only work for you if it’s invested, think long-term and don’t try to time the market
- Try not to hoard cash as an asset but invest it to get the most from the power of compounding
Inertia and Investing: Not a Good Mix
- Don’t put off for tomorrow what you can do today, jump the first hurdle and rack on with your investment plan
- Check out your options; from personal finance blogs, Reddit or Quora forums and reasonable online financial courses, there’s a wealth of resources available at your fingertips
- Create a balanced strategy to cover saving for short-term large purchases and investing for longer-term retirement goals
Just Be Careful With Those Fees
- Instead of paying an advisor 1%—which will add up substantially over time—consider low cost ETFs (Exchange-Traded Funds) that follow the market and costs as little as one-tenth of the fee
- Robo-advisors are another option for those looking for a hands-off approach, splitting the cost and save as much as $200,000 in the long-run
- Or do your homework; professional advice can be great but brushing up and managing your own funds could see you with an extra $592,000 in savings from fees alone by retirement
Do you want to start investing on your own, but don’t know how?
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DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article. Andrew Stotz doesn’t necessarily endorse any stocks or shares mentioned in the articles or the author of such articles linked to and summarized in Smart Thinking On Investing and cannot guarantee the accuracy of its information.