Looking to invest and don’t know where to start? Do you want your investment to provide an ongoing income, are you after capital growth or both? At this point in the decision-making process, many people get scared. They’re undecided about what to do with the surplus money they’ve accumulated. The first thing you should do is work out when you want to have access to the money you’re investing. This can determine where you invest that money.
Don’t Be Afraid Of Investing
All investments are different, and some are riskier than others. If you have more time to wait before you want your money back, you may be able to tolerate having the investment go up and down in the short term, while hopefully increasing in value in the long term. These investments can meet both of the earlier mentioned goals. Remember your goal in Financially Fit Bootcamp is ongoing cash flow so you can reach your Freedom Number.
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Like anything in life, there’s risk involved. But the biggest risk is sitting on the fence doing nothing. Doing nothing can even just be leaving your money in a tried and true ‘safe bank account.’ The bank pays you a minute amount of interest whilst they lend ‘your’ money to people wanting to borrow money. And they charge them exorbitant amounts of interest. This isn’t a great strategy. So the next step is to look at what is your attitude to risk is. This means asking if you want to invest your money where it may be a little riskier but generate higher returns to reach your Freedom Number more quickly. Or do you want investments to be a little less risky? You’ll still have cash flow but at a lesser amount.
When people talk about investing, they often launch into stories about how an uncle or friend invested their life savings in the sharemarket and lost it all. But what isn’t in these stories is that they didn’t put a proper plan in place to work out how they wanted the money returned to them. And they didn’t assess the risk properly.
Generating Cash Flow
At MindShift.money, we want you to increase your cash flow and reach your Freedom Number in as little time as possible. Using the sharemarket, and the options it can provide with investments, may be the most appropriate method. Whilst this isn’t to rule out other investment strategies, often you can invest in the sharemarket for minimum outlays with little cost.
With the sharemarket, you can buy what is called a share or equity. A share is exactly what it says–a share of a company that you are buying. This company may be a multinational like Apple or a small company within your home country. The options are wide and varied. When you buy this share, you can keep it and hope it increases in value. Then the share pays what is called a ‘dividend’ to you. A dividend is a portion of the percentage of the profits that the company makes. The company shares that profit with their shareholders.
Often people will like more than one company, or they want to diversify their risk by spreading their investments over several companies. This may be an even better option than just buying shares in one company. Because if that one company doesn’t perform very well, your dividend may be lower than expected. But if you’ve invested in several companies, some may have performed very well. Then your dividend is higher than expected. And that helps cover the poorer performing company.
Knowing Where To Invest
So how do you know which are good or bad companies to invest in? A typical solution is investing in a managed fund type scenario. This option can include multiple companies across a broad range of different industries. As this option does have numerous different investment portfolios it also allows you to manage the risk to yourself by being invested in line with your attitude to risk.
There are further options again with investing in the sharemarket. These range from exchange traded funds, index funds right through to currency trading. But you do need to take the first step.
Usually your first step is to consult a licensed professional in the field. Even though there are costs involved, it’s better to spend some money initially. Rather than thinking you can do it yourself and suffering setbacks, you’ll know you’re getting adequate advice.
If you took your first step toward investing today, what would it be? Share with the community in the Financial Foundations Group!
*Please Note: This article has been prepared by Chris Lee, Authorised Representative #284166, and is intended to provide general information only, without taking into account any person’s objectives, financial situation or needs. A person should, before acting on this information, consider the appropriateness of the information, having regard to their personal objectives, financial situation or needs. A person should obtain financial advice regarding his or her own circumstances before making any financial decision.
This is a sponsored post by Chris Lee. The views expressed in this article are their own. To learn more about Chris, visit our Specialist Panel.
image credit: Bigstock/ra2studio
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