Money

A Rookie’s Guide To Investing

Any pay-by-the-hour psychologist will tell you that the decisions you make in adulthood are usually connected to a series of moments from your childhood. Or at least mine did. And, truthfully, I only started to grasp this notion when I realized I was shocking with money and had a penchant for shopping. Don’t get me wrong, I love my parents, but after three marriages (each), countless home upgrades, and a bankruptcy, I was destined to have a complex relationship with money. Along with my ability to hoard credit card debt, ingrained in my psyche was the great dream—to own a home of my own.

I foolishly believed this was my gravy train to financial security once I hit retirement. And, as far as I was concerned, it was the only train, besides my 401k. Part of my financial makeover was diving headfirst into the stock market and praying for an exit row if I needed to make an equally dramatic emergency escape! The stock market has a bad reputation and Hollywood has further perpetuated this fear in investing, especially since 2008’s global financial crisis.For the moment, let’s put Mr DiCaprio (aka Wolf of Wall Street) to the side and take a look at the stock market.

Many women I speak to fall into two camps: either they are too scared to invest in stocks or are curious about expanding their future wealth, but don’t have the confidence to make the first move. Sound familiar?There is something both alluring and frightening about the stock market, but once you understand the basics and invest your first bit of cash, you’re already on your way. Of course, it’s not just about putting money into any ol’ company, and similarly it’s not a get-rich-quick-fix that you can jump in and out of depending on what your friends are doing (insert horrendous Bitcoin mania). This is one of the biggest misconceptions.

As in any relationship, getting started is the easy part; it’s the 25-year marriage that requires commitment. Here are some tips to get you on your way.

1. Read, read and do more reading

Trade your gossip mag for the Financial Review once a week and think about the businesses, not the finance. Having this frame of mind will help you form a personalised view on what you value in a business and the type of industries you want to know more about.

2. Investing in shares for your future is all about the long-term view

If you invested $10,000 in the early ’80s with no other deposits, it would be worth close to $350,000 today. Give yourself a time goal of five, 10, 20 years, make your first investment and stick to it. Patience is a virtue.

3. You can enter the market with any value of money

I use my Westpac investment app (approx. $19.95 per purchase) and Acorns app for the cheeky round-ups I don’t even notice. Acorns is the easiest way to get started in a diversified, low-risk fund with your first $1. And even better, they do all the thinking for you!

4. Diversifying is very important, so don’t put all your eggs into one basket (or one company)

Take a few leaves out of Warren Buffet’s book for billionaires and invest in funds which are made up of the top 100 or 200 companies on the market, like Vanguard. These are called Exchange Traded Funds, or ETFs and are a personal favourite of mine.

5. Investing always comes with a portion of risk

Everyone’s aversion to risk will be different. Remember Deal or No Deal? I would always go for one more case! For example, I wouldn’t recommend my 57-year-old mum invest in a high-risk fund when she is close to retiring. Seeking support from a certified financial planner is always a good idea.

6. Compounding interest will be a powerful friend

For any investment, after purchasing your shares, always choose the “reinvestment” option. This will automatically reinvest your earnings back into the shares, compounding the total, and growing all the monies.

This article originally appeared on Collective Hub.


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