Investing doesn’t have to be intimidating and if you’re looking to start your investing journey, here are 5 key tips to get you started.
1. Start early
The sooner you start investing, the better it is. Even if you only invest in a small amount of money at first, you will see the benefits of compound growth.
What is compound growth?
Let’s say you start investing when you’re 20 years old and you invest $10,000 a year for 30 years. But let’s say your friend decides to wait until they’re 35 to start investing and they invest $20,000 a year for 15 years. You both invest a total of $300,000, you just start at different times.
Assuming a 5% rate of return for both of you, when you’re both 50 years old, you’ll have just over $697,000. Your friend, however, will only come out with just over $453,000. Because they started 15 years later than you, they lost out on over $244,000- that’s the power of compound returns!
2. Invest regularly
Making regular and scheduled contributions to your investments instead of inconsistent larger lump-sums will help you accumulate wealth steadily and you’ll also benefit from dollar cost averaging.
What is dollar cost averaging?
Dollar cost averaging is an investment strategy that involves buying a fixed amount of investment shares every month and not worrying about market fluctuations. This kind of ‘slow but steady’ investment strategy can help enhance your investment returns in the long run and can reduce market volatility. It goes hand-in-hand with investing early, so you have a longer time horizon for your funds to grow.
3. Stay invested
Markets can be volatile and with ups and downs. Sometimes, when we experience a bear market, which is characterized by falling stock prices, investors may get discouraged and be tempted to sell their investments. But we have seen in the past that bear markets (down markets) end and they are eventually followed by a bull (or up) markets.
It is very difficult to time the market so have a plan and stay the course.
Don’t put all your eggs in one basket. A balanced portfolio will reduce the volatility of your portfolio as you reduce the exposure to any one type of investment. That means that even if some of your investments aren’t doing well, you’ll have other ones that can help pick up the slack.
5. Have a plan
The goal of investing isn’t to get rich quick, but to reach your financial goals in a way that works for you. Whether you’re saving for retirement or for your children’s education, you need to set practical and achievable goals and develop a plan with a trusted financial expert who can help make your financial dreams a reality.
If you’re interested in learning more about investing and how a financial expert can help you reach your financial goals with a Smart Money Plan, please connect with G&F Financial Group and book an appointment with our Wealth Management team.
Featured in this podcast:
Raman Takhar, Investment Specialist at G&F