It’s time to start investing in your future! Here’s some pointers and sensible investing strategies that will assist you in achieving your investment goals.
- Investment Goals – Identify your goals clearly and decide which are most important. In drawing up a list of goals, you should look for things that will help you feel financially secure, happy or fulfilled. Your lists should include items such as:
(i) college fund,
(ii) house fund,
(iii) emergency fund,
(iv) retirement fun
The key is to start investing early, even if you start small.
- Invest Regularly and let Compounding Work for You – When you put money into an investment, you earn returns in the form of interest, dividends and capital gains. The value of your investment compounds when these returns themselves start to earn returns. Over time, this compounding will be the most important ingredient to building your fortune.
- Controlling Debt – Another major pillar in building a successful financial life is using personal debt wisely. When you consider borrowing money, you should ask yourself will what I am doing with the money either enhance my ability to earn income or will what I am purchasing be worth more in the future. Borrowing for a home or college usually makes good sense. Ensure you don’t borrow more than you can afford to pay back, and shop around for the best rates.
- Pay Yourself First – This system is an effective way of ensuring that individuals continue to make their chosen savings contributions month after month. Simply set up a standing order whereby monthly or quarterly contributions are automatically deducted from your bank account. It removes the temptation to skip a given month’s contribution and the risk that funds will be spent before the savings contribution has been made.
- Don’t Put All Your Eggs In One Basket – By spreading your investments or diversifying, you reduce your overall risk and potential for total loss. This diversification could be achieved through investments such as Republic Bank Mutual Funds as well as by investing across various asset classes such as equities, bonds and real estate.
- Use Dollar-Cost Averaging – History has shown that owning stocks as a profitable way to grow your wealth over the long-term. Dollar cost averaging is the technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high. Eventually, the average cost per share of the security will become smaller and smaller. Dollar-cost averaging lessens the risk of investing a large amount in a single investment at the wrong time.
- Maximize Your Investment in Tax Deferred Savings – While it may not seem that way now, planning for retirement is an extremely crucial element of your financial plan for a multitude of reasons and owing the dynamics of compounding, starting a little earlier makes a big difference. The Republic Tax Incentive Savings Plans are a family of Tax Deferred Savings Plans which would allow you to reduce your taxes while pursuing your increasingly important retirement objectives.
- Estate Planning – No matter your net worth, it’s important to have a basic estate plan in place. Such a plan ensures that your family and financial goals are met after you die. Dying without a will can be costly to your heirs and leaves you no say over who gets your assets. Make sure to keep your will up to date.
- Budget – Individually our financial plans and investment needs are different and continue to change over our life cycle. You need to consider what stage you are at in your lifecycle, what your risk tolerance level is, as well as, what are your current needs and objectives ensuring that sufficient cash reserves (emergency funds) are accessible for unforeseen situations. In order, for the abovementioned to work for you, you need a structured plan to keep you on course. This is were a budget comes in. It helps you plan your work and work your plan – a key ingredient in your financial progress and success!!