Investing – 3 tips for getting started

Published on: September 17, 2019

Written by:

Adam Faulkner

Many people dream big about making a fortune investing in shares. There’s plenty of commentary on TV about what’s happening on the stock market and everyone has a ‘friend’ who has a street corner tip on the next hot stock.

The reality for most is that investing in shares is something they know absolutely nothing about…and they are scared to admit it! Which is understandable; it can feel like the share market has its own language or code and if you’re not in the know, then you’re locked out. 

For me, if you take the right steps, it can be a really effective way of making your money work for you. Here are my three main tips for getting started on your investment journey.

1. Know why you’re doing it

Start off by understanding why it is that you’re investing. What I don’t mean here is “I want to be a billionaire”.

Think about it like this: Are you investing for the long term i.e. starting early on your retirement, or are you thinking about a much more short-term strategy, for example, you want to boost your funds over three years to help contribute to buying your first home. Knowing the reason why you’re investing your money will go a long way to helping you decide your strategy. It will also help you to decide what type of investments best suit your needs, especially if you’re engaging a planner to guide you along the journey.

It’s also worth noting that you don’t need to have tens of thousands of dollars sitting idle to start investing. If you have a little spare cash, why not start small? Take a drip feed approach and start putting some money into shares, and then add more as you can afford to do so. There are tons of small investment apps out there today that can help you get started. 

2. Understand whether it’s a fair price

One of the basics of investing is being aware of price: Are you buying an asset at an expensive price, a fair value, or on the cheap? Good investors know the benchmarks, and this helps to set the right expectation for the future of the asset. If you know you have bought an asset at an expensive price, you must accept that it may drop in value; being prepared for this will help avoid some classic behavioural errors that see people sell assets at a cheap price when they should be buying them. 

This is where the value of an adviser really kicks in. It’s that inherent understanding of the market and the best investment options that can make a real difference to your portfolio. That understanding of the process behind investing can help you interrupt the jargon so that it make sense. And it saves you from trying to read through a bunch of company financial statements!

3. Manage your emotions

I’ve written before about the need to understand your behaviour. Taking a ride on the share market can be thrilling at times and always comes with a number of pros and cons. 

The key to this is keeping your emotions in check. It can be easy to catch a snippet of news over your breakfast in the morning and think that the sky is falling in. There’s regular market commentary and media companies love to report a share market ‘tank’ with a flair for the over dramatic. Remember that with investing it often has a long-term angle. You need to take that view and not make rash or snap decisions. 

It can be the same with buying your shares. Research is important but it can also become a chore. Paralysis by analysisis an old corporate saying and it can be applied here too. You can spend a large amount of time weeding through the details and still not make a decision around a particular investment option. Again, this is where a planner can help you short circuit the process.

Keen to discuss your financial situation? Book a 20 min consultation with Life Money Co today.

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