In my last article I talked about some different types of asset classes that are easy to gain access to and pretty affordable in terms of the minimum you can start with.
But how do you protect your investment? You have worked hard and, whilst cash seems pretty safe, it’s not producing much income right now. Shares have been pretty volatile, property is expensive, and many commentators keep predicting a crash.
The key to investing and protecting your hard earned wealth is:
1. Slow & steady
It’s not about getting rich overnight, it just doesn’t happen and it’s always risky. If you decide to go it alone and pick your own investments, don’t try and pick one that’s going to get you the biggest return in the shortest timeframe. Be prepared to wait and choose something a little boring. And don’t pick just one share!
Everyone I’ve know who has bragged to me about a sure thing in investment markets has lost their money. Sure, sometimes they were up, but the end result was a loss of capital. It’s akin to gambling, and that is something you should use your play money for, not your 10% savings.
2. Diversification
This word is thrown around a lot and really, it’s about not putting all your eggs in one basket. There are lots of ways to diversify: different types of assets; cash, property, shares. Then, there are different options within each of those types: Australian or International, different investment managers, different types of shares, consumer goods, financial companies, commercial property or residential property. The options are almost endless, the point is don’t just choose one thing and hope for a good outcome. Different asset types and industries perform in different ways at different times, and respond to different events in varying ways; so having a mix will help even out the ups and downs you experience along the way.
3. Seek advice
When investing your hard earned money, it is important to make good decisions. If this is not your area of expertise, seek out someone who is an expert in this area. Don’t take hot tips from friends, workmates or neighbours unless they are qualified to give such advice. Stockbrokers, Financial Advisers & Financial Planners are the only qualified professionals in this area in Australia – keep this in mind when you are either offered or seek advice. It may cost you some of your money to seek advice, but to achieve security and protection it will be well worth it.
If you do decide to go it alone then check out the smart money website for more information on investing.
This is a scary but exciting step and will benefit you over the years – remember compound interest is your friend.