MONEY WISE

MONEY WISE

For many of us, money and investments weren't discussed at home. These subjects may even be taboo within certain households -- quite possibly, in households that don't have much money or investments.

If your parents or loved-ones aren't financially independent, they probably can't give you good financial advice despite their best intentions.

 And even if your family is well-off, there's no guarantee that their financial advice makes sense for you. Plenty of parents encouraged their kids to buy a house during the peak of the housing bubble, because in their lifetimes, housing only went up.

The biggest mistake first time investors make is believing that they must identify winning investments before they invest.

The second-biggest mistake is listening to family, friends, and gurus who claim to identify winning investments. First-time investors, like most long-time investors, do better with diversified portfolios, aware that winning investments are easier to identify in hindsight that in foresight

Before you leap into any investment decision, there are some important rules you should follow:

 Set Your Goals

Decide what it is that you are trying to achieve. Where do want to be at some point in the future? What is the final outcome that you want from your investments and what is your timeframe? Think about debt - is investing the right option for you right now? Would you be better off using your money to pay off high-interest debt (e.g. credit card, hire purchase), or to reduce your mortgage?

    Know Your Risk Profile

You need to know what type of investor you are – essentially, how much money are you willing to lose? How much volatility (ups and downs) can you tolerate? To work out your investor type, use our investment planner.

  Know How You Want To Invest Your Money

What mix of investments suits your investor type? Bonds, shares, property, bank deposits? Will you invest directly yourself or use managed funds? Our investment planner can help here too.

  Do Your Homework

Research, compare and contrast everything – or get someone to do that for you. Read the business sections of the newspaper, go online, talk to your adviser, bank manager, or accountant. We suggest you also read any documents, such as the investment statement and/or prospectus, relating to the investment you are considering.

  Research Different Companies’ Investment Options

 If you are going to invest directly in a company, find out which companies’ suit your type.

 Do they offer the kind of investments you are after? What are the rates of return for each investment? What is the level of risk associated with the return?

  Research the Companies Themselves

What does the company do? What markets is the company in? Who is running the company? Have they ever been declared bankrupt? How is the company run? Does the board have independent directors? How has the company performed in recent years – is there a steady performance over time?

  Get the Right Advice

Shop around for an Authorized Financial Adviser (AFA) who you have confidence in. Authorized Financial Advisers must tell you (in a written disclosure statement) how they are paid and the impact that can have on the advice they give you. Find out more about getting investment advice.

  Spread Your Risk

As the saying goes, don’t put all your eggs in one basket. Spread your risk around different options and different companies. For example, if you are considering high-risk investments, you can balance your risk with other investments in lower risk areas, like bank deposits or cash and bonds.

Well they say that you never know how it will turn out unless you try and never be the shy one.