Top tips for growing your wealth

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“Investing” – it sounds like a scary word.

If you want to grow wealth and make your family’s dreams a reality, then getting started with property investment is the best way to do it. Luckily, in reality, investing isn’t that scary. It’s just finding a way to make your money work for you, and produce more wealth, which in turn produces more wealth.

There are so many different options, from bonds and index funds to shares and property, it’s hard to know where to begin. Here are our top five tips to get you the best results with investing, no matter what kind of investing you choose:

Tip 1: Set goals

Before you begin choosing investments or figuring out where to allocate your funds, you need to figure out exactly what you want to get out of the process. The goals you set dictate every part of your investment strategy, so you need to understand them.

When thinking about your goal, ruminate on these five key metrics. They’ll help you figure out when you’ll need your money and how you should approach investing.

  • Timeline – how long do you want to invest for? This is vital, as you need to know if you need to protect your money in the short term, or if you can take more risks to earn a higher long-term reward.
  • Type of returns – do you want to grow your lump sum in your investments, or do you want a stream of income across your investment period?
  • Type of management – do you want to manage your investments yourself, or leave them in the hands of a qualified fund manager? Are you looking for passive investments, such as Index funds, that don’t require a lot of tweaking, or active investments that engage your mind when making decisions?
  • Liquidity – the term “liquidity” refers to how locked in your investments are. If you need the flexibility to dip into your investments when possible, you want high liquidity (this often comes at the expense of returns). If you can handle tucking your money away and not touching it for the duration, then you require a low liquidity (and will likely benefit from higher returns).
  • Risk – How much can you afford your investments to fluctuate? Over time, if left alone, any investment will usually give a positive return. But during that time, the returns may fluctuate dramatically, and if you need to sell off an investment when it’s performing poorly, you’ll lose out. Generally, a higher risk investment means more volatility (fluctuations) but a higher average return. Lower risk means less volatility but lower average returns.

Tip 2: Know your type

With so many different types of investment products on the market, it’s difficult to know where you should start looking. One key to figuring this out is to understand what type of investor you are, and to look for products that suit your profile.

Investors tend to fall into four main types: Conservative (extremely low risk, lower returns), Balanced (medium risk, medium returns), Growth (higher risk, higher returns) and Aggressive (very high risk with the potential for extremely high returns). A fifth type – Defensive – is usually used to refer to investors in their retirement years who are concerned with preserving the wealth they’ve already accumulated and include next to no risk in their portfolio.

Sorted.org.nz has a quick Investor Kickstarter test you can take to help you figure out your investment type.

Tip 3: Diversify and win

The best investment strategy is one that spreads your risk across different investment types and companies. Throwing all your money into one hedge fund or only at the property market means you’re vulnerable to market forces – by spreading your funds across different investments that fit different risk profiles, you preserve your wealth during recessions and leaner times, and will come out better in the end.

Tip 4: Educate yourself

You wouldn’t jump into a new job without researching the company first? Follow the same rules when you invest. There are plenty of great resources, including websites, books, and in-person seminars, to help you get to grips with investing and the different options. Not to mention, financial advisors and specialised investment advisors like the team here at OPES.

Our top tip is to seek out experts who share the same investor profile as you. For example, if you’re an aggressive investor, look for blogs and books by authors talking about investing in aggressive options. There are tons of great general websites to help teach you the basics, InvestopediaThe Motley Fool and Mr Money Mustache are just a few you can have a look at.

Tip 5: Seek qualified advice

As well as learning as much as possible for yourself, you should seek out more qualified advisors to help you stay on the right path to meeting your goals. The key fact to remember is “qualified” advice. When your cousin tells you about this “really great investment opportunity”, or your workmate starts going on about “guaranteed returns”, you need to run a mile. Stick to the experts – like the team at OPES – and you’ll reach your goals sooner. If you want to get started with investing, but don’t know where to begin, then book in a free consultation today . We’ll help you take the first steps on the path to wealth.