Learn how to make the most of your earnings through smart investing strategies. Explore tips on assessing financial goals, diversifying your portfolio, educating yourself, and seeking professional advice for long-term financial success.
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“I’m a student who had racked up a fair amount of money working full time a while back, but I feel like I could be doing more with what I earned. I tried dabbling into stocks using Sharsies and crypto a while back but failed miserably.”
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Assess Financial Goals and Risk Tolerance:
Understanding your financial objectives is crucial. Ask yourself what you are saving and investing for. Are you looking to build a retirement nest egg, purchase a home, or achieve other specific financial goals? Knowing your objectives will guide your investment choices. Additionally, assess your risk tolerance. This measures how comfortable you are with the possibility of losing money. Suppose your past experiences with stocks and cryptocurrencies have made you risk-averse. In that case, you should focus on lower-risk investments like bonds or dividend-paying stocks. On the other hand, if you have a higher risk tolerance and are willing to withstand market fluctuations for the potential of higher returns, you can allocate more of your portfolio to growth assets like stocks.
Diversify Your Portfolio:
Diversification is a risk management strategy that involves spreading your investments across various asset classes. Doing so reduces the impact of any single investment’s performance on your overall portfolio. For instance, gains in another can help balance the losses if one asset class underperforms. Consider diversifying by holding a mix of stocks, bonds, real estate, and potentially even some safer, interest-bearing savings or term deposits.
Educate Yourself and Seek Professional Advice:
Gaining knowledge about the investments you are interested in is essential. This involves understanding the basics of how these investments work, the factors that influence their performance, and their associated risks. There are many resources available, from online courses to books, that can help you become more informed. Moreover, consider consulting with a financial advisor or a certified financial planner. They can provide tailored advice, help you create an investment plan aligned with your goals, and ensure your investments align with your risk tolerance.
Be Patient, Consistent, and Tax-Aware:
Successful investing requires a long-term perspective. Avoid reacting impulsively to market volatility or short-term trends. The stock market, in particular, tends to grow over time, so it’s often best to adopt a “buy and hold” strategy. Set up a regular investment plan to ensure consistency, such as contributing a fixed amount each month or quarter. This strategy, known as dollar-cost averaging, helps mitigate the impact of market volatility and may improve your average investment price over time. Also, be aware of tax implications related to your investments, especially in New Zealand, where capital gains may be subject to taxation. Understanding these rules can help you make more tax-efficient investment choices. Lastly, learn from any past mistakes you’ve made in your investment journey. Reflect on what went wrong and use these lessons to adapt your investment strategy as you move forward. Keep an eye on your long-term financial goals and stay committed to them.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
