If you had asked me a year ago whether I ever thought about investing, I would have laughed and given you an awkwardly detailed description of the gorgeous miner’s cottage (insulated with central heating and a kitchen worthy of commercial status, complete with gardener) I constantly daydreamed about buying. Of course, the reality was that I had a massive credit card debt, a small business yet to pull into the profit zone, and very little idea about what it would take to turn it around.
Fast forward a year. I swallowed my pride and took a waitressing job to pay off my debt. My small business still struggles, but I’ve extended my game plan by a couple of decades so there’s time for the struggle and I’ve saved an emergency fund. Incredibly, it has become time to think about investing. Not in a miner’s cottage, I wasn’t working at Marque, but making some initial forays into the wide world of risk and venture. If I thought I was clueless about getting out of debt, then investing is a world far beyond that. I consulted the Oracle (otherwise known as Google) and here are some tips I found, drawn from an article on Wise Bread.
Know When You’re Ready
This basically means no debt (excluding a mortgage, which is a positive debt) and an emergency fund. This means on top of money you have to invest, you have 3-6 months of wages safely tucked away should it be needed. Wise Bread suggests, and it sounds sensible, to defer investment until you’re capable of making super contributions as well.
Know How Much
This is a very personal decision. Every financial set-up is unique so working out how much you plan to invest is very dependent on factors such as job security, the state of the rest of your finances, whether or not you own your own home, plan to pursue more education, have kids in the next couple of years. Sit down and work out a very detailed budget. How much do you want to save, as well as invest? They’re unfortunately not synonymous.
Where Do You Want To Invest?
It’s important to know what kinds of things you’re interested in investing and, especially, what you would prefer not to invest in. This is influenced by your age and risk profile, but also by your political and religious beliefs, your views on the environment and interest in investing in ethical businesses. Finding a financial investor that you trust and can investigate ideas that corroborate with your values is crucial, as well as providing sound financial advice.
Spread Your Assets
Instead of the one bow to the arrow, one of the better risk mitigating strategies is to diversify. If you’re not financially savvy about investing, you can invest in mutual funds which does the thinking for you- spreading out your assets across shares and bonds (offensive and defensive investments). There are some that offer investment strategy according to your age, becoming less risky as you get closer to retirement age. Myself, I prefer to keep a closer eye than that. Read every piece of fine print, talk to people who understand the ins and outs of investment and ensure it sits properly with your risk profile.
The earlier you start, the better your results. Compound interest plus the general performance of investments over long periods of time work wonders. Just be sure to have flexible money to assist in emergencies, and keeping clear of consumer debt, and experts suggest you’re onto a winner.