According to the Australian Securities and Investment Commissions consumer website, MoneySmart, it’s not the kind of mantra you’d find at the roulette wheel of a casino.
‘Instead of relying on good luck, the wise investor takes time to understand the basic principles of investing-then develops and sticks to a sound investment plan,’ MoneySmart says.
MoneySmart has produced a practical guide to investing for consumers titled, ‘Investing between the flags’.
‘If you’re thinking about investing your money, there are decisions you have to make and risks to assess,’ MoneySmart says.
‘Because we all have different experiences and goals, your decisions about investing may be different to those of your parents, children, neighbours, workmates or friends.
‘The key to deciding what’s right for you is knowing your own circumstances and goals.
‘Investing is like a lot of things in life-rewarding but not risk free. When you go swimming at the beach, you will reduce the risk of drowning if you swim between the flags. Similarly, when you invest, you will reduce the risk of losing money if you invest “between the flags”.’
We’ve summarised MoneySmart’s six steps to investing ‘between the flags’ in the table below.
Click here to download the complete booklet from the MoneySmart website.
‘Reading this guide will put you on the path to investing wisely. However, the advice we offer is general in nature. Working out a detailed strategy that meets your individual needs may require the help of a licensed financial adviser.’
Step 1 – Understand some key things about yourself
Before you choose an investment, take time to think about yourself and your goals. Key questions you should consider include:
- What is your time-frame?
- What is your appetite for risk?
- What is your style?
- What are your values?
Step 2 – Understand some key things about investments
How do you work out which investment is right for you?
There are basically two types of investments: debt and equity. MoneySmart says it’s important to understand the difference if you’re planning to invest. including how they work, how they meet your needs and what you need to consider.
Step 3 – Develop an investment plan
Developing an investment plan is a crucial step on the path to a secure financial future.
You can develop an investment plan by using a licensed financial adviser or you can create your own. Either way, you must always do your homework on individual investment decisions. After all, it’s your money.
Step 4 – Decide how to invest
To decide how you want to invest, you need to rate your own expertise. That means deciding whether you want to ‘do-it-yourself’ or get a professional to do it for you.
MoneySmart says each method has its pros and cons-and you can, of course, do both. Ultimately, the right approach is the one you feel most comfortable with.
Step 5 – Implement your plan
Statements of Advice, Product Disclosure Statements, application forms, contracts, leases. Like it or not, investing ‘between the flags’ means paying close attention to paperwork.
Before investing in a product, MoneySmart says to make sure you consider all of the following:
- talk to a licensed financial adviser
- check out the provider
- check out the investment
- assess the risks
- check the suitability
- check the fees and charges
- check if there are legal and tax issues, and
- understand your exit strategy.
Step 6 – Monitor your investments
Think you can just invest and forget? Think again! It’s important to keep track of your investments.
DISCLAIMER: All information provided in this article is of a general nature only and is not personal financial, taxation or investment advice. It does not take into account your particular objectives and circumstances. No person should act on the basis of this information without first obtaining and following the advice of a suitably qualified professional advisor. To the fullest extent permitted by law, no person involved in producing, distributing or providing the information in this article (including Award Accounting for Business Success Pty Ltd, each of its directors and employees) will be liable in any way for any loss or damage suffered by any person through the use of or access to this information.