So you are retired and maybe have some time on your hands. Well, it’s never too late to start investing.
If it all seems too much, and you are overwhelmed by choice, that’s okay. Everyone has to start somewhere, and like any new skill there are a few tips to get you on your way.
Where to start
First of all, you need to take stock of your position. What debts do you have, do you have any spare cash, your income, tax position, etc.
Write down a clear picture of your financial situation so you know how much you can invest.
Learning curve
Next up is to get educated. You may have mixed feelings about the rise of the internet, but when it comes to learning about investing there are loads of free online resources and courses to help you out. People want you to make money.
A great – free – place to start is the government website MoneySmart. It has loads of information and it’s Australian-specific, which is vital. Too many online sites are US-based and have almost no relevance to our taxation, investment and employment laws. Other free resources include your bank and some unions that provide financial advice about superannuation.
You should also educate yourself about risk levels, asset classes, i.e. property, cash or shares, and investment ‘language’.
A good rule is: do you understand it enough to explain it clearly, simply and successfully to someone else? If the answer is no, more learning is required.
Make a plan
Do you want a better retirement? Shore up your savings or maybe even just keep yourself occupied by following the market? All of these reasons are valid, but it helps to clarify your choice of investment.
Part of your plan should also involve how much risk you feel comfortable with. Higher returns often mean higher risk.
Once upon a time we could have ridden out the market, but as we age, we may not have the time to see a risky investment get back on track. Conversely, you may want to maximise your investment while you can and are happy to take on that risk.
While some people may be happy with a safe, high-interest bank account, others thrive on the thrill of taking their chances on speculative mining projects. It’s horses for courses.
If it’s all a bit overwhelming, you can always consult a financial adviser. Unless you have a high degree of financial knowledge, a financial adviser will be able to help achieve your goals. However, before you hand over any control of your money, always get a full rundown of the fees charged and check if they are registered here.
Part of your plan should involve how much you wish to invest. And don’t think you have to start big. You can start with as little as a couple of hundred dollars and increase that amount as your confidence grows.
Investing is a bit like gambling, so you shouldn’t invest any more than you are prepared to lose.
How much will it cost?
While you should make money investing, it isn’t free. There are fees, taxes and charges involved. What will be your brokerage, bank and adviser’s fees? What are the taxes?
If you are investing in property, what will be the body corporate and agent fees? Pesky small fees such as smoke detector certification and advertising fees for vacant properties all add up.
Are you comfortable with the costs involved? Do the returns help you feel comfortable with the fees, or would you prefer to keep it cheap and cheerful?
Make sure you know the ongoing costs, so there are no hidden surprises to sour your attitude.
How will you track your investments?
Investing shouldn’t be set and forget. You should keep track to ensure you are working towards your goals.
Ways to track your investments are as varied as the investments themselves, and MoneySmart offers a good guide here.
At the very least, you should check how they track against your goals at least twice a year.
And always let someone know where your investments/passwords/documentation are so your executor isn’t faced with a paperwork nightmare when you pass away. It doesn’t have to be a family member, you could lodge the information with a solicitor or in a safety deposit box.
Do you have any advice to add? Why not share your experience in the comments section below?
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