It's important to always remember the basic rules of investing. Your investment strategy should always consider three key things: your goals, your timeframe and how you feel about risk.
Setting goals and sticking to them.
Setting your investment goals gives you the chance to set out where you want to be and what you want to achieve. As part of your goals it‟s important to determine your timeframe: short, medium or long-term.
It‟s not always easy to set out your goals so your Bernie Lewis financial adviser will sit with you and guide you through the process to help you work out what you want to achieve from investing your money.
Know your investment timeframe
Time in the market is key to building your wealth. Depending on your goals will depend on your timeframe for investing.
The longer your money is invested, the more chance you have of reaching your investment goals because you can take advantage of compound interest (if your investment is one that bears interest). Time also tends to smooth out the ups and downs of the market, and reduces the risk.
When things are looking bad in the short-term, it can be easy to get caught up in the bad news and lose sight of your long-term goals. For most investment strategies you should think in years, rather than days. History shows us that a well structured investment should increase in value over time.
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Understand your appetite for risk
When investing it is important that you consider the level of risk as well as the return on an investment in view of your circumstances and investment goals. Risk means different things to different investors. For some, investment risk means the likelihood of a loss of capital, while for others it is the level of volatility of an investment, or the risk of an asset not producing enough to live on.
Riskier investments such as shares can lose value in the shorter term so they generally aren‟t considered suitable for a short-term investment strategy. But over a longer period, they have the potential to generate significantly higher growth than a cash investment.
Depending on your goals, timeframe and risk tolerance will depend on your investment strategy and the assets you invest in. You need to make sure you‟ll feel comfortable with the amount of risk you‟re taking on and the potential consequences of your investment decisions.
Your investment choices
Most people only know of three types of investments: cash, shares and property, when in fact there are many options:
- Property
- Australian shares
- International shares
- Cash
- Fixed Interest
- Alternative asset classes
Within each asset class there are more choices to help you effectively manage your money and generate greater outcomes.
For example, shares may be a suitable investment option for you. But you can choose whether you directly manage your shares or whether you purchase them through a managed fund.
Once your Bernie Lewis financial adviser has discussed your investment goals and needs with you they will then recommend suitable investment options and strategies for you.
Keeping on top of your investments
Reading the daily newspaper & stock market reports is not keeping on top on your investments. Managing your investments requires reviewing more than the performance of your investments. You should review your goals, timeframe and level of risk every year or more regularly if needed to ensure your investment strategy continues to meet your needs. Your Bernie Lewis financial adviser will discuss a suitable review program with you.
Your situation and lifestyle will change throughout your life so an investment portfolio and strategy that you began in your twenties probably won‟t suit you in your forties when you have a family, greater financial commitments and less time until retirement.
