Investing 101: A great place to start

Investing 101: is simply putting your money to work to help you achieve your personal & financial goals.

That makes it sound so simple right? But in reality it can be pretty darn confusing.

You’re worried:

That you don’t know enough about it
That you don’t have enough money to start with
That you could lose it all by making the wrong decision

Sounds familiar?

We’re not taught about investing at school (not even the basics). It’s not a topic of conversation that comes up very often at home between parents and children. Unless you work in a related industry or have a partner that does, chances are it probably never comes up at all!

Self-education in this space is a tricky business as well. And I say ‘business’ with intention, given the vast number of financial services and financial products all vying for your attention and dollars.

This is not to say that any one of those products may not be the perfect start, middle or end for your personal investment journey – but it’s darn hard to work it all out when you’re starting from scratch and you’re a little green to the concept of investing.

It’s like going to buy a car for the first time. We’ve all been there so can relate. You’re not only concerned about ‘what’ car to buy but ‘who’ to buy it from. Do you go with a sedan or an SUV? 5 seats or 7 seats? Do you go to see your local dealer or shop around online yourself?

But you don’t let all those decisions stop you from buying the car right? You don’t let the fear of being ripped off by a ‘dodgy’ car salesman stop you from getting what you need. You simply, do your homework and get to it.

So where do you start when it comes to investing 101?

I like to start with asking ‘why’. Why am I investing?

Never mind ‘where’ or ‘what’ – just stick to ‘why’ for now. Yes, starting early is important but not at the expense of being clear on your goals and expectations. Investing is after all a very personal financial decision, and you need to take the time to make it personal.

Why are you investing? Start by identifying what financial goals you have that are linked to your decision to start investing.

Get a downloadable worksheet to identify your WHY for getting started with investing here.

Are you saving the deposit for your first home? Are you hoping to afford private schooling for your kids? Do you want to be able to help them out financially when they finish school with a car or funds they can put towards a university education for example?

If you’re a forward thinker, perhaps you’ve even started thinking about your retirement and what kind of income you’ll need to live a comfortable lifestyle once you finish work.

Thinking about your ‘end game’ is important because it puts the goal posts down somewhere. You need to know where you want to end up – before you know which way to step first.

Articulating your goals also helps you tap into your motivations. We’re all motivated differently – and it’s important to know what your motivations are when it comes to investing so that you can commit to them over the longer term and stay the course.

The fanciest of financial plans and investment strategies are useless if you the investor cannot commit to the goals they are designed to achieve.

Asking yourself why will also reveal the timeframe you are working to with each of your goals. If it is a financial goal to save for your first home – can this be achieved in a couple of years or are you looking at 5 years plus?

Your investment timeframe is an important part of deciding what investments you will make. For example, for those goals with shorter timeframes, you are unlikely to make investments into the share market given the volatile nature of returns with that type of investment. Choosing investments is a much bigger and more complicated topic.

So to recap – you need to start with your ‘why’. This will reveal your financial goals, motivations and timeframes for investing. It will form the backbone of your plan and give you direction. You must know yourself, how much more confident you feel about anything once you start to make a plan.

Until then, all you really have are vague ideas with some hopes and plenty of questions.

This blog is all about building confidence with simple, relevant, practical and actionable finance tips for you. Investing is big subject and confidence is built over time – by mastering bite sized chunks of information.

So I will be doing an ‘Investing 101’ series of posts where I will walk you through the basics and tackle some of the biggest (and most common) concerns with investing and the practical steps you can take to work through them.