Whether you are making your first plunge into the investment market, or due to unforeseen circumstances you need to start investing later in life, there are some basic tips outlined below that you should consider before starting your investment process.

Getting Started

Start with a blank piece of paper or spreadsheet and establish a budget by recording your income and expenses. This will identify if you have a surplus to invest or a deficit to reign in. Your budget can be that simple or you can divide your budget up into components that include essential expenses, discretionary expenses and lifestyle expenses.

Once the budget is complete, your goals become the centrepiece. What do you wish to achieve by a certain date? For example - buying a car, going on holidays overseas or saving for a house deposit or a wedding?

Then you want to work out how much you are prepared to set aside and save for your goals. A regular savings plan is a great way for clients to start building wealth. Age will dictate the level of risk that an investment plan should contain.

Seeing a financial planner

A good financial adviser will help you bring together your budget and your goals and these two documents work together to form a basic financial plan and this is a great starting point for new investors.

To take your plan to the next level, your planner will include wealth protection and retirement saving strategies to give you a flexible financial plan that can be reviewed and adjusted as you progress through your life journey.

Discussions with your financial advisor should include investment opportunities as well as cashflow management, debt management and wealth protection - all crucial to securing your financial future.

Tips for Success

Protect yourself. The biggest cashflow injection into your household budget is you. The need to protect this "wealth" is vital to building and maintaining your asset base. Medical costs are expensive and can take a large chunk of savings. Mortgage costs can also quickly erode savings and lead to further stress on households. The ability for an individual or their family to access a benefit in the event of an injury or death is of immense importance.

Review regularly. It is great you have started down the road to financial freedom and success, but with any plan, accountability is important. Don’t just place your budget in the bottom draw, or your investment paperwork in the pile in the corner of the room. Take the time to sit with your partner or financial adviser and review. Regular review allows for quick responses to strategies that might be not working, or adjustments can be made that takes into account changing goals or objectives without impacting largely on the overall strategic plan.

Accept that sometimes performance will be negative but stick to your plan. The benefit of being young and having a long term horizon for investing allows you to take risks - risks that need to be taken in order to grow an asset base. Sometimes these risks will cause some losses to be unrealised or sometimes crystallised. The point is not to be demotivated by this. Review and if the strategy is still sound, keep investing as you have plenty of time to make up these losses. Getting out at the wrong time can be more damaging to your long term goals then riding the volatility that comes with investing. If a new investor is older and risks to capital need to be minimised, it does not mean that your investments will always be positive. If leaving money in a term deposit does not suit your objectives then accepting some negative performance is essential in maintaining a long term investment horizon.

There is never a "perfect time" to invest, so waiting for that time to arrive may never happen and many opportunities will pass by. What is important is that you are ready to invest. Taking the first step in the investing process can create nervousness. Make sure you have a financial advisor you are comfortable working with to help ease these jitters and keep you motivated to succeed.

For more information

For more information, please contact Ian Walker from Lantern Advisory on 07 3002 2690.

Disclaimer
The information contained in this article is of a general nature and does not take into account personal circumstances. Before making any decisions based on the factual information contained in this document please consult with your financial adviser.