Make your money work harder so you don’t have to

Investing money is a strategic way to grow wealth over time. Whether you are saving for retirement, a major purchase, or simply looking to build financial security, effective investing can help you achieve your financial goals.

Before you invest money, it is important to ensure you have an emergency fund in place. This fund should cover three to six months' worth of living expenses and serve as a financial safety net in case of unexpected events. Once you have decided how much spare capital you have available for investment, you should spend some time clearly defining your goals. Having clear objectives will shape your investment strategy and help you determine exactly what you need.

Understanding how much risk you are comfortable with and the time you have until you need the funds will help you choose the right type of investments. Different investments carry varying levels of risk, and defining your comfort level with risk is crucial in selecting the right strategy. Generally, longer-time horizons allow for a higher tolerance to market fluctuations, but this will largely depend on your willingness to withstand those fluctuations.

Taking the time to educate yourself about different investment options, market trends, and basic financial principles will give you a deeper understanding of investing and will empower you to make informed decisions.

The tax implications of any investment will need to be considered and consulting with a tax professional or financial adviser can provide personalised guidance based on your individual circumstances and the latest tax regulations. Selecting the right investment vehicle can impact the tax treatment of your investments, especially when you want to withdraw the money. Careful planning may be needed to manage the withdrawals from your investments to potentially reduce your overall tax liability. Staying informed about any changes in tax regulations will allow you to consider the impact on your investments and make timely adjustments to your strategy, if necessary.

Selecting investments that align with your goals, risk tolerance and time horizon is an essential component. Asset allocation involves deciding how to distribute your investments among different asset classes such as stocks, bonds, mutual funds, exchange-traded funds (ETFs) etc. Each has its own risk-return profile, and a diversified portfolio may include a mix of these based on your risk tolerance. Diversification across different asset classes will help to reduce the overall risk being taken and can mitigate the impact of poor-performing investments over time.

Investments should be approached with a medium to long-term perspective. Trying to time the market or making impulsive decisions based on short-term fluctuations can lead to poor outcomes. Patience is often required as market cycles are inevitable, and there will be periods of ups and downs. Try to stay disciplined and avoid the temptation of making emotional decisions during market downturns, as overreacting to market fluctuations can impact future returns.

Once invested, keeping yourself informed about market trends, economic indicators, and global events that could impact your investments is an important factor. Life circumstances, and financial goals can also change, so it is important to adapt your financial plan to ensure it aligns with your current situation.

It is necessary to regularly review the performance of your investments, make adjustments or rebalance the portfolio to ensure the asset allocation still aligns with your risk tolerance and objectives for the money. This ensures you maintain the desired risk-return profile and stay on track toward achieving your financial goals.

If you're uncertain about where to start or how to build a diversified portfolio, consider seeking advice from a financial adviser. Our professionals can provide personalised guidance based on your individual circumstances. Remember, there is no one-size-fits-all approach and investing inherently carries risks, and there are no guarantees of returns.