Taking the first big step: Investing for Beginners (Even the Scared Ones!)
Congratulations!
You have some money to invest, but the thought scares the hell out of you. This is perfectly normal. We really don’t like things that are unfamiliar to us. Don’t worry, with a little guidance, a bit of a checklist you can start investing with confidence.
Get started! The complaint I hear most from clients is, ‘I wish I had started earlier’
First things first: Breathe. It is important to remember that investing requires a long-term perspective. Sure, there will be ups and downs, but with a solid plan, a little patience and growing confidence, watch your money grow.
Now, let’s address the elephant in the room: fear.
- Fear of losing money: It’s true, investments come with risk. But remember, risk and reward are intertwined. By understanding your risk tolerance and diversifying your portfolio, you can mitigate the risk and increase your chances of success.
- Fear of what is unfamiliar: Investing can seem like a complex language reserved for the guys in the pinstriped suits. But fear not, there are plenty of resources available to educate you, from online courses, I have one of those , to books, and some financial planners.
You are ready to take the next step. 5 things to do to get you started:
- Define your goals: Are you saving for retirement, buying your first house, or a dream vacation? Knowing your goals will guide your investment choices. In my Money Makeover course I teach the SMART principle. It is the way to go. Do one for each goal.
| S | Specific | What needs to be done |
| M | Measurable | How much do you exactly need |
| A | Attainable | Determine the steps you need to take |
| R | Realistic | Can you stick to the budget |
| T | Timeframe | When do you want to achieve your goal |
2. Assess your risk tolerance: At what point would you start losing sleep if the value of your shares goes down? What is your tolerance to any potential losses? This will determine the types of investments you choose. At what point would you panic?
| Is down 20% | or down 30% | or down 40% | or down 50%? |
3. Do your research: Learn about different investment options. Each investment has its’ own characteristics and risk profile. This is where the internet comes into its’ own. Finder, Moneysmart, Canstar are fabulous sites to access the information for just about everything pertaining to investments.
| Investment returns | Income, Income & growth, Growth only |
| Investment timeframes | Immediate availability, short term (up to 2 yrs), med term (2-10 yrs) & long term (10 years+). These are my preferred timeframes. You may come across others that differ slightly. |
| Investment type | Shares, bonds, model portfolios, managed funds, Index Funds, ETFs |
| Investment risk prolife | Secure, conservative and the level of volatility. Volatility is determined by how often the investment changes in value over time. |
This is not an exhaustive list but is an excellent place to start. It’s important to understand your own risk tolerance and investment goals before making any investment decisions.
4. Start small: Don’t put pressure on yourself to invest a large sum all at once. Begin with a small amount and gradually increase as you gain confidence.
The ‘start small’ strategy for beginners and seasoned investors is gold because incorporates two of my favourite investing principles;
Compounding interest
Compounding interest is when your interest earned is added to your capital, earning interest and that new capital (capital + interest) is earning interest… and the new capital (capital + interest) is earning interest.
It is powerful, all that is needed is time!
Dollar Cost Averaging
What is Dollar-cost averaging? Rather than plonking a large amount of money all at once into the share market, you can drip feed it over time. You invest over regular intervals, as opposed to all at once.
How? Dollar-cost averaging can be easily setup via a Dividend Re-investment Plan (DRIP).
5. Choosing a Trading Platform: Choose a platform that is easy to understand and navigate. I prefer to use organisations that have people available to speak with me.
Investing is a powerful tool for growing your wealth. To overcome your fear and embark on your exciting investment journey, you need to:
- take small steps
- educate yourself
- choose options that match your intended outcomes!
Your future financial self will thank you!
Check out my online Money Makeover Course, this topic and much more is covered in Money IQ element of the course in Modules 2 and 3. These two modules bring you up to speed with your financial literacy and money competence.
