Regular savings are a great way to start your wealth accumulation plan, and if you are working you should really try to make sure that at least some of your hard earned income is going towards something you really want.
It’s a really satisfying feeling to know that at the end of a period of time that you have been able to achieve something, but depending on how long that time frame is you may have different options available to you to invest.
For example: You are saving for a television. You don’t want to go to the store for credit as you don’t want to pay interest. However, this only takes you six months to save for given how much you have left at the end of each month. Using a cash savings account is likely the best option for you.
However, you may have a longer term goal to achieve such as building a deposit for a home in five years or simply building a portfolio that produces a passive income stream for you and your family. This allows you the opportunity to use more volatile investments that can achieve far greater returns over the longer term than a simple savings account.
You could be one of the fortunate few who has a very stable job, lots of surplus funds and the desire and understanding to borrow money to invest. We can work with you to ensure that your investment selections will help you to maximise your returns by choosing investments that work well no matter what your needs are.
Key to any investment plan is the ability to spread your risk across different areas. Think of a roulette wheel. Betting purely on a single number can give you the maximum possible returns, but choose wrong and you have lost everything you had to begin with. Investment works in a similar way.
Choose well on a single investment and you might experience a windfall, but without a good understanding of your investment you could experience disaster.
Diversifying your investments works by spreading the risk. Instead of having just one investment in one market sector, we aim to ensure that you have your investments spread across multiple assets, multiple sectors, and multiple styles of investment.
By not aiming for the stars, we help you through the good times as well as the bad.
There is a phrase coined in our industry called ‘dollar-cost averaging’. It sounds complicated, but in essence what it means is that buy investing regularly you get to reduce the risks involved in market timing. A common misconception is that market timing is the key to successful investing, when in fact the reality is that time and diversification play a much more important role in the success of an investor.
The simple fact is that the number of investors who have been able to choose the correct moment to sell an investment at its peak, then re-purchase the investment at the bottom are few and far between. Those who can successfully repeat this process are just simply unheard of. The great thing about regular investing is that it allows you to purchase investments in small parcels at varying times.
By investing in regular intervals, you minimize the risk of making a large lump sum investment prior to a large fall. Conversely, you also reduce the chance of making a large gain just before a period of strong returns.
Borrowing To Invest
Typically, people tend to think that there is only one option when it comes to borrowing money to invest with. Investing in property is almost engrained in the Australian psyche, and the dream of home ownership and owning a property portfolio is one that many Australian’s share.
Whilst we support all forms of investment, it is important to understand the driving force behind these investment needs, and our mantra of providing education to our clients ensures that all forms of investment are considered when it comes to investing, be it shares, bonds, property or any other form of investment.
Andrew Dalton can help you with your wealth accumulation, so contact Andrew today to get started.