The key to successful investing is all about making choices that meet your goals today and for the future. Your financial situation and personal circumstances will affect your decisions every step of the way. It is important to find a balance between risk and reward that is appropriate for your investment goals and time horizons.
Whether you are investing for your own or your child’s education, you need a plan to help your money grow. Make sure you understand yourself as an investor by assessing your investment knowledge and objectives, and considering your annual income, net worth, risk tolerance and investment goals.
Compounding, according to Australian Investors Association, is a fundamental component of wealth creation. The concept focuses on investing as early as possible so that the money itself will multiply by earning a return.
Regardless of your age and your initial savings amount, compounding will work for you. It is best, however, to start at an early age to make significant interest over the long term. It is easier to invest in a smaller amount on a weekly or monthly basis than a lump-sum contribution.
Diversify Your Portfolio
Diversification or spreading your money to different kinds of investments helps reduce the risks and increase potential returns over time. A mixture of investment products will protect your portfolio from downturns, as the value of some investments may go up while others will go down. Apart from bonds, equities and savings accounts, you can also invest in commercial property.
Experts from cwl.com.au suggest hiring a property lawyer for a practical and cost-effective outcome. You should also examine your portfolio on your own, or with an advisor, at least once a year to make sure that it meets your needs.
Consider Your Time Line
The types of investments you choose will depend on your time horizons, or whether you are saving for short- or long-term goals. For short-term, choose investments that are more accessible and conservative in nature. For long-term goals, however, choose growth-oriented and long-term investment.
Successful investing calls for planning and finding investment opportunities that allow capitalisation of earnings. You should consider your appetite for risk or how much risk you are prepared to accept on your assets. It is best to work with financial advisers and lawyers to guide your investments.