Wealth Creation Blog
Whether you are reaching the twilight years of your career or if you are just starting out, for many Australians, making sure that you have enough money when you retire is something that is on your mind. To ensure that you have accumulated enough wealth, this will likely mean that you need to make some form of investment decisions. However, with the limitless opportunities that you can invest in; (Shares, Property, Cryptocurrency, Term Deposits, to name a few), where do you get started?
Start at the end.
In order to determine what is the best asset class to put your hard-earned savings in, it is important to ascertain what you are trying to achieve. Every asset class has its benefits & costs and determining what the best asset for you will depend on what you are trying to get out of that investment. Shares can offer great opportunities for growth as well as dividends, while property offers the ability to not only use your own funds to grow your wealth, but also borrowed funds. Paying off your debts help to ensure that you reach retirement without debt obligations, however investing in a portfolio of shares can provide you with an income stream when you do retire. Deciding on the best asset to invest in today, will be far easier when the end goal is clear.
Doing nothing is an investment decision.
Unless you are hiding your money under your mattress, you are in fact making an investment decision. If you aren’t investing, you are likely putting your money away into a savings account (which is a form of investment). While this risk of losing those funds in comparatively low, the interest rate that you receive is also modest, particularly in the low interest rate environment in Australia. This can form part of an appropriate wealth creation strategy in the instance if it is likely that you may need access to money immediately and want to take on a very limited amount of risk. However, if you have a significant timeframe to retirement, you are likely forgoing opportunities to grow your wealth above the measly interest rates that banks are offering today. Once again, determining whether this is an appropriate strategy will be dependent on the goal that underpins the strategy.
Do I invest in Shares or purchaser a Property?
This debate feels as old that the Earth itself and is probably the question I hear most as a Financial Adviser. Both assets have their own benefits and in turn their own limitations. In property you can have a modest deposit and can invest in an asset that is valued more that $600,000. However, shares can provide high levels of dividends, can return larger rates of return and can offer tax benefits in the form of franking credits. Additionally, by only looking at these two assets you are missing out on so many opportunities! Alternative asset classes such as, Infrastructure, Bonds, Commercial Property and many more can have a place on many wealth creation journeys. Putting your eggs in one (or two) baskets is rarely a good idea. Having your assets spread across multiple asset classes and taking advantage of the benefits of each, can help reduce risk and grow your wealth more effectively.
Time in the market is versus timing the market.
We have all dreamed about it. An investment falls in price, you make an investment at the bottom and profit on the boom. Many have waited for these opportunities and few have gained. The fact of the matter is, that by investing regular amounts of money and being invested in the market for a longer period of time, you will be far better off than waiting for the perfect time. So when is the best time to invest? As soon as it is affordable to do so.
In short, have a goal and know what you’re aiming for, make right decisions as to what are the best assets to reach that goal and don’t try to time the market. At 360 Financial, we have helped many clients refine and achieve the financial goals that are important to them and their family. To hear more about how we can help get your wealth creation plan on track, feel free to reach out on 03 9427 0855.