Start with an emergency fund, educate yourself on investing, and assess your risk tolerance. Diversify investments in stocks, bonds, and consider retirement accounts. Regularly review and adjust your strategy, and consult a financial advisor if needed. Make informed decisions and adapt to your changing financial situation.
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“I’m 22, male with 40k in the bank, wanting in the future to start a business with a good friend of mine. I know it will take a good couple of years to save as much as I need. But what’s the best way to handle the 40k and get it built over time? (Note: I know nothing about investing) do I give it to an investment company? Or do I just leave it in the bank? Any tips or information would be very useful.”
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It’s great that you’re thinking about your financial future and considering starting a business with your friend. Here are some steps to consider for managing your $40,000 and potentially growing it over time:
Emergency Fund and Basic Savings: Start by setting aside a portion of your $40,000 as an emergency fund. This fund should be easily accessible in a high-yield savings account and cover at least 3-6 months of your living expenses. Having this fund in place ensures you’re financially prepared for unexpected situations.
Education and Risk Assessment: Since you mentioned a need for more knowledge about investing, it’s essential to educate yourself. Begin by reading books, taking online courses, or seeking advice from financial professionals to understand the different investment options available. Additionally, assess your risk tolerance. As a young investor with a long time horizon, you might be more inclined to take on some level of risk for potentially higher returns, but it’s crucial to invest in a way that aligns with your comfort level.
Investment Options and Diversification: Explore various investment options. Consider investing in the stock market through individual stocks or exchange-traded funds (ETFs). You can also explore mutual funds, which pool money from multiple investors to create a diversified portfolio of stocks and bonds. Diversification is critical; don’t put all your money into a single investment. Diversifying across different asset classes can help spread risk. If available in New Zealand, also consider contributing to retirement accounts for potential tax advantages and long-term growth. Consulting a financial advisor for personalised guidance can be a wise decision if you need clarification on your investment options.
Regular Contributions and Review: If possible, continue saving and investing a portion of your income over time. Regular contributions can help your investments grow steadily. It’s essential to revisit your investment portfolio periodically to make adjustments as needed. Your financial goals, risk tolerance, and life circumstances may change, so your investment strategy should evolve accordingly. Additionally, be aware of any tax implications related to your investments, as New Zealand has specific tax rules for various investment options, and it’s essential to understand how they may affect your returns.
Investing involves risk, and there are no guarantees of returns. Therefore, it’s crucial to make informed decisions, continually educate yourself, and, if needed, consult with financial professionals to tailor your investment strategy to your specific financial situation and goals.
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.
