Investment: How to take the first step and keep moving forwards
Your first contribution to a unit trust, whether it’s a lump sum or monthly debit order, is an admirable step towards reaching your savings goals. However, it’s important to have a robust strategy in place so you can follow through to achieving positive long-term investment outcomes.
“Where can I invest my money?” is a common question people ask at the beginning of their investment journey. Once you begin, you need to remain actively engaged in managing your finances to work for you.
It’s worthwhile speaking to an independent financial adviser (IFA) who can help you draw up and implement a plan that sets out precise, measurable short- and long-term investment goals. It should be reviewed and adjusted accordingly – typically on an annual basis.
Unit trusts: An easy way to begin
Unit trusts offer young investors many benefits, such as easy access to financial markets and diverse asset class exposure. They are suitable for a range of investment objectives and timeframes. Furthermore, they are managed by investment experts.
These types of investment products can help you achieve your financial goals as long as you ensure you avoid common behaviour-linked pitfalls. Here are five pitfall-proof tips to help young investors.
The debit order is a vehicle to accomplish positive long-term outcomes
A disciplined approach is required if you want to receive positive long-term returns on your investment. The best way to start is to decide how much you can afford to invest and set up a monthly debit order, so the contributions are deducted from your account automatically. In addition, make sure you adjust your debit order regularly to account for the impact of inflation on your money. If you don’t, it can erode your buying power.
Continue to build momentum
After the first contribution, make a concerted effort to keep building momentum to achieve a favourable result. Draw up a ‘blueprint’ outlining the steps that should be taken – you can also speak with an IFA if you need some assistance.
Increase your debit order when possible
Consumer price inflation can erode buying power, causing chaos on our monthly expenses. Young investors may not realise you need to take inflation into account when reviewing your monthly debit orders. For example, should inflation be sitting at 5%, consider increasing your debit order by the same amount to counterbalance the potential negative impact.
Invest your annual increase
If you’re lucky enough to receive an increase or cash windfall, it’s recommended that you maintain your disciplined approach and invest the lump sum instead of spending it on unnecessary items. By investing it, you can reap the rewards of compound interest.
Start a unit trust or tax-free investment
Start saving by considering committing to making monthly contributions to a unit trust investment or tax-free investment account. Speak with an IFA who will advise you about where you should save your money; in other words, which type of investment will suit you best.
Remember, reaching your goals requires sticking to a plan and having your priorities in order. Happy saving!