Starting your first job is a milestone we all look forward to. However, achieving financial freedom and professional satisfaction come with the responsibility of saving and investing for your future. Stepping into financial investments can be an exhilarating yet intimidating experience for young Australians.
Learning to invest your money wisely is one of the most important steps you must take to secure your financial future. The sooner you begin investing, the greater your returns will be over your lifetime. But where do you start? And, with so much information available nowadays, how do you make an informed decision? In this article, we will give you a few steps and pointers to help you get started on your investing journey.
1. Identify Your Goals
The first step in your investing journey should be to identify your financial goals. What would like to achieve with your investments? Are you working toward a big-ticket purchase, or are you working on building your retirement fund? Knowing where you are headed financially will help you develop a plan that is meant to handle your specific requirements.
Once you’ve established your goals, you will need to work out how much money you will need to set aside to invest each month. This step is crucial, as this will help determine how much risk you are willing to take. When you are getting started, it is best to start small and gradually expand your portfolio. According to the Australian Securities and Investment Commission, it is recommended to avoid investing more than 10% of your monthly income in one investment product.
After you’ve taken care of basics such as paying bills and instalments, creating a savings deposit, and buying health insurance, it is important to evaluate how much money you have left to invest, as well as to assess your financial goals.
2. Do Your Homework
Before you begin investing, is imperative to do your research and get your finances in order. As such, you should consider the amount of risk you’re comfortable with, as well as your goals, and how long it will take to get there.
- Get your debt under control: Owing money or not making your repayments on time can be stressful and hamper your plans to start investing for your future. It is crucial to make a list of all your debts, and add it to see how much you owe. If it looks overwhelming, then you can remind yourself that you’re taking charge of your money, and that a penny saved is a penny earned anyway!
- Understand investment risks: Before embarking on your investing journey, it is important to understand that there is a likelihood of losing some or all the money you’ve invested. This can be due to your investment losing value or not performing as expected. Everybody’s risk tolerance is different, and you can invest in assets of different levels of risk to achieve various financial goals with different investment time frames. It’s essential to understand your risk tolerance and find investments that are aligned with it.
3. Research Your Options
To find suitable investments, it is essential to consider the following factors:
- Access to liquidity: How long will it take to sell the asset and get your cash out? This is an important factor to keep in mind when you invest your money.
- Returns: What is the expected return on the investment? You can search online or seek the help of a financial adviser to understand whether returns are calculated from income or capital growth.
- Time frame: Another important aspect of investing is finding out how long it will take to receive the expected return.
- Buying and selling cost: Before you sign the dotted line, it is crucial to read the fine print and determine how much it will cost to buy or sell the investment.
- Tax: Will be taxed on capital gains and income earned from an investment?
Final Thoughts
Investing early and regularly is one of the best ways to ensure your financial security. Planning and investing your income wisely is essential if you have just started earning money. While these pointers will get you started on your journey, it is also important to seek the advice of a professional before you lock in on any investment.
