Investment resolutions for the new financial year
- Fri 03 July 2020
Rule out luck and make your wealth-creation journey a success.
By Kendall Flutey
For those starting their investment journey, the current waters will feel choppy. The markets are innately tethered to society, so when general uncertainty rises, the markets react.
Although we are repeatedly told these are unprecedented times (and with good reason), when we take a step back and look at the cycles from a distance, things become clearer.
Looking at these repeating cycles as a fixture of the economy itself, those new to investing may find confidence in the general trajectory of the sharemarkets in the five to 10 years post-crises.
This is not our first economic crisis, and I would bet my portfolio it will not be the last. We can take some comfort from the recovery after the 2008-09 Global Financial Crisis, the caveat being that our current situation was not inherently triggered by the economy, but rather health decisions and behaviours that affected the economy.
Kendall Flutey, Banqer
During uncertain times, human instinct is to regress towards the known and retreat there until clarity arrives. For new investors this might mean pulling the reins on, but an opportunity exists that does not present itself every day.
Coming back to basic principles, the same sensible advice rings true now just as it would at any other time: if you have the ability to invest, why not do so today?
Let us not forget we have the added advantage that investing is now much more accessible than for previous generations.
Whether enlisting the help of experts or using micro-investing Apps, anyone can get into the sharemarkets on their own terms. And right now, your money goes a lot further.
Yes, there is uncertainty currently, but it is temporary. If you have the ability to invest now, why not, especially if time is on your side?
The same principles apply now as they would at any other time. Do your research, enlist help if you think you need it and dip your toes in at your own pace.
Tania Smyth, Morgans
By Tania Smyth
It can be tempting to pile into the sharemarket in the hope of quick profits. It is sometimes called gambling or betting on the market. If it ends well, it is usually due to luck and generally luck is not a research tool that professional analysts use.
If we have ruled out luck, what can you do to make your investing journey a success? Consider the following ideas.
Setting goals
In all aspects of life, setting goals helps us focus and the same rules apply with investing. Why are you investing, what do you want to achieve and when do you want to achieve it?
Answering these questions and defining goals will help you pick the right investment mix and give the best chance of success. For example, the goal of buying a house in two years compared to investing for a comfortable retirement in 30 years involve investing but both require a completely different approach.
Diversification
You have heard the saying, “don’t put all of your eggs in the one basket” but diversification is more than just buying a few different parcels of shares. It is not about buying lots of small investments either, known as over-diversifying.
It is about building a portfolio with an appropriate mix of assets that earns the best return for risk you are willing to tolerate, based on your investment timeframe.
Knowledge
Type into Google “learning about investing in the sharemarket” and 10 million results pop up. There are plenty of resources at your fingertips, but are they right for you? Some reliable sources include ASX online courses and ASIC’s Moneysmart website.
However, as in any trade or speciality, investment professionals have spent time gaining qualifications to build their expertise and spend a lot of their waking hours analysing markets. Sometimes it is better to outsource and benefit from others’ knowledge and experience.
A good adviser will be prepared to sit down with you, help define goals, gauge risk tolerance and help invest in an appropriate mix of assets most suited to you. She or he will pass on their knowledge about what makes a good investment and which ones are appropriate for your situation. They can guide you through the ups and downs of the investment world.
Because it is a journey, there are plenty of twists (euphoria) and turns (despair) that as a long-term investor you will experience.
Advisers have the experience and knowledge to help you navigate along the way and not lose sight of your reason for investing. Ask your family and trusted close friends if they have a financial adviser they can recommend.
Happy investing – and yes, sometimes a little luck helps, so good luck.
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