Top 5 Tips on Investing for Your Future
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There used to be an ad on TV that went, “it’s 9 o’clock at night, do you know where your children are?”
I always think about that ad when people ask for advice on their investments. It’s one of the first things I like to ask: it’s 9 o’clock at night, do you know where your money is?
The answer tends to be, “I have no idea.”
Think about that.
This question also applies to people’s superannuation, their most significant or second-largest amount of money that is usually being invested for them. And they have no idea where it is.
So, that’s my first tip.
1. Know where your money is.
I went over a portfolio recently of a client and a friend of mine. And before I took it on, I went into detail about where his super was invested. It turned out he was a massive investor in condoms.
I asked him, “is there a reason for this?” He had no idea he was invested in condoms, or to such an extent.
There is very little or no transparency for consumers on their super, and there should be. You should know exactly where your money is.
2. Have a strategy.
My friend, the condom investor, didn’t really think that was the best investment for him. But I asked him to think about it; why did he think that? It might have been a great investment.
Without a strategy, it’s easy to get turned off by good investments.
You need to have a strategy. You can’t go into anything without a plan. Most people don’t even go into the weekend without a strategy (even if that strategy is to kick back and relax).
But those people may have no strategy for their super – this hugely important pool of money.
There are a few ways you can create a strategy; either become an insider and learn it yourself or work with somebody to build that strategy.
3. Simplicity is key.
Back on Wall Street, when I used to talk to a trader, and he would start to tell me the reason for his position, armed with graphs, equations, and folders of information, I would know that I’m talking to a BS vendor. He was talking rubbish.
A good, successful strategy is simple. To honestly know your strategy, it has to be simple, and it has to be easy to explain.
My rule of thumb is that your strategy should be an elevator pitch. By the end of an elevator ride, you should be able to tell someone what your strategy is. It might take 10 floors, but it’s still an elevator speech, not a podium speech.
Having simple strategies will make your life easier and more fun.
4. Start now.
If you’ve talked to me before (or read any of my articles), you’ll know what I think about starting young. The sooner you take control of your finances, the greater success you’ll have.
So, start young, and if you can’t start young, start now.
Starting young helps you use the magic of compounding. Compounding will have an extraordinarily positive impact on your portfolio.
Small accumulations over a long period brings great results. The easiest way to do this is through automatic deposits. Most people find that if some of their income goes straight into savings, they don’t miss it.
And to get the most prolonged period is to start as young as possible. Start now! Please don’t wait until you’ve got a lot of money to do it. We don’t wait until we’re fit to go to the gym; we go to the gym to get fit. It’s the same idea.
The smallest amount of money saved regularly, automatically, will have a significant impact on your future.
5. Stay out of debt.
Debt isn’t good for anyone (other than the lenders). If you have debt, you should treat it like a hot potato – get rid of it, fast!
Ads make it look like getting into debt is the happiest, most wonderful thing possible. Personal loans, car loans, home loans. The way it’s advertised, you would think that getting debt is the most exciting thing that could ever happen. Banks make a lot of money off debts; it’s very exciting for them, but not for you.
Investing for your future doesn’t have to be complicated or overwhelming, as long as you enact these key tips.
So, for investing, remember:
- Know where your money is invested.
- Create and understand your strategy – and that strategy must be simple.
- If someone is giving you complex explanations and a complex strategy, avoid them.
- Start investing, and start saving now.
- Avoid debt when you can – sometimes debt can’t be avoided, like a mortgage or student loans, but pay off this debt as soon as you can.
This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.
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Who is Paul Atherton, That Wall Street Guy?
An ex-Wall Street advisor who worked with major players in the global financial industry for over 30 years, Paul’s mission is to help regular people reclaim their wealth and financial security.
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