Young Australians are choosing to invest more in 2017 than they would have in previous years. A recent study by the Australian Securities Exchange (ASX) shows that the number of investors aged 18-24 has doubled in the last five years alone.
While the age distribution of investors is slowly balancing, the youngest group of investors is still well behind. However, this young age may be the best possible to time to kick-start your financial investment plan.
With plenty of years ahead of you, starting your investments now means they’ll have an extended period with which to grow.
If you’re starting to think about your financial future, here are five things to consider.
Before you set out on your journey toward financial security, you have to know where that journey is starting. You’ll want to be in a comfortable position before you start investing.
Many investment opportunities will require an initial lump sum deposit, while others allow you to make smaller contributions on a regular basis. Work out what is required of you, and whether you can afford to begin.
After you’ve figured out where you’re starting from, determine where you’re headed. Setting measurable, timed, and achievable investment objectives will give you an idea of how you want to be investing.
Figure out what you’re investing for – retirement, major purchases, or just general wealth accumulation. Then, find out how much you will need to meet those goals and when you want to have achieved them.
No investment will guarantee returns. When you make an investment, you’re committing your money to some form of endeavour in the hopes of profiting from that endeavour’s success. However, if your investment fails, you have to be prepared to accept that loss.
Younger people, like you, are more likely to be willing to take on higher risk profiles, which offer greater returns.
After all, you’ve got so much time ahead of you to make up for losses.
Diversification is possibly the single most important thing to remember when building your investment portfolio. Ultimately, it comes down to the old saying of “don’t put all your eggs in one basket”.
For example, residential property has seen impressive gross returns of 8.1 per cent per annum over the past 10 years, according to a July 2017 ASX report. However, as whispers of a cooling market float around, investing solely in property may be a mistake.
Often market conditions that cause one asset category to grow will also cause another to suffer. By diversifying your investments, you’ll be able to counteract the losses of one asset’s failing with the successful returns of another. Diversification is essentially the act of hedging your bets by investing in a varied set of products.
When it comes to making long-term financial decisions, it’s important you don’t rush anything. Take in all the above advice, and apply those questions not just to your initial decision to start investing, but to every investment choice along the way. Each investment should reflect your goals, risk profile, and asset diversification.
Taking time and accountability for your investments will make managing your assets all the more worthwhile down the line.
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