Investment can seem like a scary proposition, but it can be quite simple once you know the basics. In fact, if you have a KiwiSaver account then you’re already an investor. So, what can you do next to build that investment portfolio? AdviceFirst adviser Wendy Chen shares five points to consider.
Have goals in mind
“The first step for successful investing is knowing what you want to achieve, whether that’s in the short or long term. Knowing the financial outcome you’re seeking lets you work towards it and reach your goals,” says Wendy. “Writing down the short, medium and long term goals can help you set a target.”
Wendy recommends always asking yourself where you want to be in the future – you should visualise a timeframe and outcome for your investments. You should also keep in mind any debt you’re currently carrying that could be holding you back and consider paying off any high-interest debts like credit cards.
Find a good risk and return balance
Bigger returns inevitably mean bigger risks. High-risk investments can be all over the place in the short term, but in the long-term these generally tend to give better results.
“Decisions about how much risk you’re willing to take on can depend on; what kind of investment you’re looking for, what sort of goals you’ve set for yourself, and your own risk portfolio – the downturns you might be willing to accept,” says Wendy.
Diversify to spread your risk
All investments carry risks, but if you want to reduce the risks associated with your investments, you could consider spreading your money across different kinds of investments. For example, instead of buying shares in one company, you might buy into different companies, industries, or countries.
“In this scenario, the investments that do well will lessen the impact on the value of your portfolio of the investments that suffer a loss. When it comes to investing, more options can sometimes be better,” says Wendy.
Have a viable asset mix
The mix of different assets in your portfolio should match with the type of investing you want to do.
“While most people aim to own property as their main investment, there are other options to consider such as shares, and managed investment funds like KiwiSaver,” says Wendy. “Each is different in terms of investment and goals, and each will lead to different results.”
Grow the wealth
“Because investment is all about building your money over time, primarily through compound interest, starting as early as you can helps,” says Wendy. “A longer timeframe on investments means greater value.”
Once you’re up and running, regular additions to your investments also improves your results. Reinvesting returns and putting more money into funds puts you on the road to more growth
If you would like to review your investment options, our financial advisers can help.
Call us on 0800 438 238 or email letstalk@advicefirst.co.nz.
