The investment world can seem like an endless maze, so we’re sitting down with Certified Financial Planner Daniel Rickard to learn how to navigate investing as a beginner. From getting started to trendy saving tech, get savvy on the new investment opportunities to maximise your money and make informed choices.
Investing can seem like a daunting concept, so how do we get started?
As a beginner, the best first step is to educate yourself about the basics of investing. Start by reading books and articles or listening to podcasts. The next step would be to establish a budget and set aside a portion of your income specifically for investing.
Understanding your risk tolerance and time horizon when starting out with investing is crucial to building a well-balanced portfolio that aligns with your financial goals. By gauging your comfort level with potential losses and the time you have before needing to access your investments, you can create a strategy that optimises returns while minimising undue risk, ensuring a more secure and successful investment journey. A pre-constructed multi-asset portfolio that aligns with your risk tolerance and time horizon might be a good place to start as you continue to build your investing knowledge.
Is cash still king, or do you recommend broadening our investments?
While cash is an important part of any investment portfolio, it’s essential to diversify your investments to minimise risk and maximise potential returns. Real cash rates are still negative; if your savings account is paying 4% p.a. while the most recent inflation data is 7 per cent per annum, you are actually losing 3 per cent per annum. By investing in a diversified portfolio of stocks, bonds, credit, real estate, and cash that is aligned with your risk profile, you may be in a better position for long-term financial success.
With interest rates rising, it can be a challenge for many to consider finding more pockets of money to invest. Any advice here?
In the face of rising interest rates, it’s crucial to prioritise and optimise your spending habits. Focus on reducing unnecessary expenses and paying down any high-interest debt. You then need to prioritise savings for investing over other, often more fun, expenses. This is hard in any environment, but the current cost of living crunch we are facing makes it even more challenging. Start by aiming for a savings goal of 10 per cent of after-tax income and go from there.
Are you seeing any recent investment trends?
There have been several trends that have improved the landscape for new investors, making the world of investing more accessible than ever before. The reduction in fees for various investment platforms and products has significantly lowered the barrier to entry, allowing new investors to participate without heavy financial burdens. Improving technology and user-friendly interfaces have simplified the investment process, making it easier for beginners to navigate and manage their portfolios.
Micro-investing platforms have emerged as popular options for those with limited funds, enabling individuals to invest small amounts and gradually build their wealth. Furthermore, the wealth of information available through online resources, blogs, and financial podcasts has empowered beginners with the knowledge they need to make informed investment decisions and grow their financial assets. While these trends offer potential opportunities, it’s crucial for beginners to understand the risks involved and consider their personal financial goals before diving in.
Is there a minimum sum of money someone would need to start investing with? We see apps that round up change from your purchases to start investing; what are your thoughts on this kind of tech?
There is no specific minimum sum required to start investing. However, it’s important to consider the fees and costs associated with various investment options. Fees can add up when investing small amounts, but there have been new technological solutions to this problem. Micro-investing apps that round up change can be a great way for beginners to start investing, as they allow for low-cost entry and encourage regular contributions. Micro-investing apps such as Raiz Invest, Spaceship Voyager, CommSec Pocket, and Pearler are all worth consideration. Don’t get me wrong; there’s no chance that a 70-cent round-up from your recent Woollies purchase is ever going to grow into an amount that will influence your retirement. However, these apps do a great job of increasing familiarity with investing, forcing savings, and boosting confidence so that, in the future, people will be more comfortable investing.
