Posted on 21/12/2020
Whether you’re looking to invest your money into super, shares, a savings account, or all of the above, it's important to have a clear strategy, and know why you’re investing.
Opel Nelson, Associate Financial Planner at Statewide Super, says that when it comes to investing your money, the first step should always be to set clear goals.
This allows you to gain a better understanding of your investment priorities and risk tolerance.
“It's important that you take some time to work out your investment goals and identify whether they are short, medium, or long term,” she says.
“Generally, for short term goals, low risk investment options are more suitable.”
Opel defines short term goals as those that you hope to achieve within one to three years, for example:
- Paying bills;
- Going on a short holiday; or
- Taking time off to care for a new baby.
Even with medium term goals, Opel advises that a conservative strategy is generally most appropriate.
Medium term goals will usually fall into the three to five year range, and examples could include:
- Saving for a house deposit;
- An overseas holiday; or
- Planning for a wedding.
When it comes to longer term goals, however, higher risk investment strategies may be more suitable. These goals might include saving for:
- major renovations;
- a holiday home; or
“Generally high risk investment strategies are more suitable for long term investing,” Opel says.
“And with long term goals, you have more time to weather the ups and downs.”
And when it comes to investing your money, Opel Nelson, Associate Financial Planner at Statewide Super, says diversification is important.
“Diversification means having your funds invested in different asset classes,” she explains.
“This means that in the event that one asset class isn't performing well, you have exposure to other assets that may be performing better.
“Diversification helps reduce risk, think of it as not putting all of your eggs in one basket.”
For most people, superannuation will be the largest investment they make. It’s also a long term investment, which allows for fluctuations in markets over a lifetime.
As such, when it comes to the long term, superannuation should certainly be a key consideration in your diversification strategy.
“We all have different attitudes and tolerances to risk, along with different timeframes for investing, so there really isn't a one size fits all approach, when it comes to choosing the right investment mix,” Opel says.
“It is important, however, to remember that over the long term even a 2% difference in someone's investment return each year can have a large impact on their retirement funds.”
To learn more about setting clear investment goals that are right for you, contact Statewide Super today to speak with one of our financial planners*.