Many Aussies decided to start investing last year but if you’re still toying with the idea, here are helpful tips to get started.
Half of Aussies regularly think about their financial future but as much as 70 per cent of us don’t have a financial plan, new data reveals.
This is partly due to COVID-19 and the consequential shutdowns and closed borders. Many Aussies having extra cash to play with after saving money on travel and entertainment costs.
The report found 82 per cent of Gen Zs and 49 per cent of millennials made their first investment last year.
So, if you’re looking to jump on board the investing train, Vanguard Australia’s head of personal investment Balaji Gopal, has laid out his best tips to get started.
5 top tips for investing beginners
1. Evaluate where you’re at financially
Before beginning your investment journey, it's important to sit down and map out your financial position and goals so that you know where you are and exactly what you’re working towards.
Start by looking at your savings, income, living expenses and personal debts – this will paint a clear picture of your financial position and what funds you have available to invest.
2. Create clear goals
It’s important to plan your goals clearly when you invest to give yourself the best chance of success.
Without a plan, it’s easy to get distracted by daily headlines or rattled by short-term share market bumps. You may end up trying to time the market, chasing unrealistic investment returns and missing out on long-term gains. Make sure your goals are clear, you have a plan and you know where you’re heading.
Write down your financial goals in weeks, months and years. Keeping your goals front of mind will help you create an investment plan and stick to it.
3. Diversify your assets
Diversification is an investment strategy that lowers your portfolio risk and helps you get more stable returns.
Diversification lowers your portfolio's risk because different asset classes do well at different times. An important decision for every investment portfolio is how much to allocate to different types of investments. This mix of investments such as shares, bonds, property or cash is referred to as your asset allocation.
What this essentially means is that if one business or sector fails or performs badly, you won't lose all your money. Having a variety of investments with different risks will balance out the overall risk of a portfolio.
4. Do your research
A national survey by Vanguard Australia recently revealed where Australians seek their investing information. Gen Z (47 per cent) and millennials (36 per cent) sought the opinion of friends and families the most, while Gen X looked to the media (21 per cent), and social influencers (11 per cent) for information.
While talking to a financial planner is the most effective way to manage your personal finances, there are other ways to do your own initial research as a jumping-off point. Beginner investors can consider reputable podcasts, seminars and investment company websites for general information.
Having the right information at hand before you begin investing will allow you to make considered decisions.
5. Keep your eyes on the prize
While it’s tempting to impulse buy a new outfit or order takeaway three times a week, make sure to exercise some financial discipline. A useful way to stay on top of your spending is to create a realistic budget. If you know you will buy a coffee every single day, add this to your budget – you need to be transparent and honest with yourself about where your money is going.
Above all, stay focused on your end goal and what you’re hoping to achieve. This will be the biggest motivating factor for you to maintain your discipline.