Grow your money - Make Dreams Real!

Investing is about using the power of compound interest and time to grow your wealth. It is about taking a long term strategic view, aiming to preserve value in terms of spending power, while generating enough income to use for current living costs.

Here are some key elements to consider:

Quality of investments

It is more important to have investments that “survive” than to chase what appear to be higher rates of return.  You should also consider how important it is to be able to sell an investment – or to get your money back. For example, a debenture has a fixed term and you normally cannot get your money back before the due date, but a corporate bond may be able to be sold on the stock exchange as can shares.

Diversification

No doubt you have heard the saying “Don’t put all your eggs in one basket”. Diversification doesn’t mean investing your money in five different finance companies; it means using different types of investment and spreading investments so that not too much is with any one investment. Using managed funds is one way of ensuring that your money is widely invested.

Dollar-cost averaging = diversification over time

Financial markets go up and down in an unpredictable way.  To avoid investing at a “bad” time, a regular savings approach will mean that the risk of picking the wrong time is reduced.

Consistency rather than emotion

Financial markets operate on two emotions – fear and greed.  It is very easy to allow emotion to dictate short term decisions.  Many people buy shares after the market has been rising, then sell after the market has fallen when the way to make money is to buy when prices are low and sell when they are high.  Taking a long term view of the markets is important in these challenging times.