Getting smart with money

For most young adults, considering investment strategies can be duller than an episode of Better Homes and Gardens. With recent changes made to superannuation and pension laws, Australians are being forced to consider their retirement at a younger age. But Gen Y is a fickle bunch with a short attention span – how can we break it down into plain English to set them on the path to reaching their long and short term financial goals?

Here are some useful tips to becoming a more savvy investor, helping you – or your kids – to achieve those financial goals.

1) Make sure your personal finances are in order

The most important thing to have when starting an investment portfolio is capital. It is essential to begin saving a sufficient amount of money to invest into the market. Reducing credit card debt, limiting discretionary spending and committing to savings goals are crucial for building up cash.

2) Make it a part of day to day life

While social media has made us more connected, it has also made us more distracted, whittling away at our productivity and opportunities to spend time on personal growth. You have to ask yourself, is seeing what this person eats every day making me a better person? We’re not saying go off the grid; instead, use social media to your advantage. ‘Follow’ industry voices and thought leaders and soon, your social media newsfeed will be full of educational posts that can build your investing knowledge in a fun and relevant manner.

You could also go old school and turn to a book (or kindle if you’re a committed digital native!). Why not get stuck into ‘how to’ guides or autobiographies written by successful investors, or embrace YouTube or Investopedia and watch tutorials on investment basics in your spare time? You can take time out on the train or before bed to upskill in investing, instead of scrolling aimlessly through cat memes on Facebook. Podcasts are another great resource – just search by ‘investment’ in your phone’s podcast app, but try to stick to local market content.

3) Manage expectations

Rome wasn’t built in a day and neither will your nest egg be. While outperforming the market isn’t impossible, it is ill-advised. When individuals begin to speculate rather than truly understand their investments, that is when things can go wrong. Aim for modest returns similar to that of the market you are invested in.

4) Research

Put the same effort into understanding your investment selections as you would when purchasing a car or television. Properly read through research reports provided by various research houses, inspect a company’s financial statements and ask around to gauge the public perception of the product in question. It also a good idea to make comparisons with other companies or funds within the same market or industry – there are websites that can help you do this.

5) Diversify

Having all of your eggs in one basket is a dangerous game, we all know this. For example, if you have all of your money invested in Australian equities and there is a crash in the market, you stand to lose a significant amount of your portfolio. If your portfolio is spread across a range of different asset classes, you are safeguarded against any dramatic declines in one particular asset. Likewise, a dip in international equities could be offset by a rise in property prices if you’ve diversified your investments and placed your eggs in more than one ‘basket’.

6) Speak with a professional

There is no shame in seeking advice, whether it be chatting with a financial adviser or a stockbroker. You go to a doctor when you’re sick don’t you? Get a mechanic to check out your car if it’s broken down? A finance professional will be able to sift through the technical jargon and work with you to achieve your short and long term financial goals. This will give you more time to focus on other, more important facets of your life.

The most important tip of all is just to DO. If you keep your money in your back pocket instead of investing it, your money isn’t working for you; the only money you will have is what you save and it won’t keep up with the rate of inflation. It’s time to have your money working for you, growing in value, so that you can have the lifestyle you desire, now and for the future.

Get the ball rolling and speak to a member of our Financial Planning team. Call 1300 726 082 or drop us a line if you’d like to set up a time to discuss your interest in investing in your future.

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.