Choosing the right investments in Australia’s ever-growing market can be an intimidating endeavour, especially for those who are just getting started on their investment journey. If you’re wondering where to put your money, there are many investment options available, but where do you start, exactly?
At Flagship Investments, we understand that choosing the right investments for your financial goals is crucial in order to work towards maximising growth and building a solid financial future. However, we also know how daunting this can be without the necessary knowledge and guidance. That’s why we’re here to provide the tips you need so you can start your investment journey off in the right way.
Explore Diverse Investment Options
When it comes to figuring out the best way to invest your money in the Australian share market, one of the first things you’ll want to become familiar with is portfolio diversification. Only investing in one particular company or sector can prove detrimental to your investment strategy should your chosen investment or market segment take a downward turn.
This is because each investment’s performance largely depends on the market conditions for that particular company or the sector they operate in. There may be certain points in time when some of these companies or sectors experience a downturn while others perform well. Exploring your options and investing in various companies or market sectors can help you mitigate the volatility associated with concentrated investment.
While you may choose to diversify your portfolio yourself, there are other options available to help you streamline the process, such as LICs, ETFs, and managed funds. By investing in these, you can gain access to well-established diversified portfolios that contain quality investments and are built and monitored by seasoned fund management experts.
To learn more about branching out in the investment market, check out our 5 tips for diversifying your investment portfolio.
Balance Your Risk Tolerance Appropriately
Building your portfolio around your risk tolerance can decrease your chances of enduring more market volatility than you’re comfortable with. However, there are a number of additional factors on top of your risk tolerance that can influence how you choose to invest your money. Essentially, investing is a balancing act between your financial goals, preferred investment timeline, and how much you’re willing to risk to try and achieve your goals within your established timeline.
Of course, the best investment options would be the ones that successfully strike a balance between all three of these parameters. However, this will require you to be realistic with your goals and how easily you can achieve them. Before you begin investing, you’ll want to assess your three parameters to make sure they properly align with one another.
Let’s say, for example, you’re hoping to make a large amount of money in a short space of time, but your risk tolerance is low. While no investment is completely risk-free, investments that are viewed as short-term and high-yield also typically carry a much higher risk than long-term investments with projected sustainable growth.
As a result, it’s unlikely you’d be able to build an investment portfolio that aligns with all three of these parameters. In such circumstances, you would either have to reassess your goals, your timeline, or your risk tolerance before you could invest your money in a balanced and responsible manner.
Remember to Consider the Tax Implications
It’s also important to be mindful of the tax implications that come with investing money in Australia. By familiarising yourself with the taxes attached to your investments, you can also structure your portfolio in a way that minimises your tax obligations, thus maximising your overall returns.
This may involve taking advantage of tax-efficient investment strategies, such as the franking credits you can receive through Australia’s dividend imputation system. Check out our blog posts on how to calculate fully franked dividends and how a franking credit offset can impact your income for more information.
Stay Mindful of Market Trends
Just like any other market, investments in Australia can rise and fall depending on a range of factors. That’s why it’s a good idea to keep an eye on the companies and sectors you have invested in to track their performance. This can help you make sure your portfolio continues to align with your risk tolerance and investment goals. By monitoring market trends, you can adapt and refine your investment strategy in response to changing conditions, making any necessary adjustments in a more timely manner.
Market trends can also provide you with insights into emerging sectors, industries, or specific assets that show potential for growth and may currently be missing from your portfolio. Staying updated on these trends can better equip you to make informed investment decisions and take advantage of any opportunities that align with your investment goals and risk tolerance.
However, it’s worth remembering that while acting on certain trends can have a notable impact on your portfolio’s long-term performance, other trends will merely cause temporary market changes. Familiarising yourself with both of these trends will enable you to distinguish the long-term impacts from the short-term ones so you don’t get swept up by any fleeting events.
After all, while these trends alone may only have short-term impacts, allowing them to influence your investment strategy can lead to impulsive decisions that actually could affect your portfolio long-term (though likely not in a positive way).
Seek Professional Advice Before You Invest
Investing money in Australia or any other market can be complex, especially if you’re just starting out. However, talking to a professional, such as a financial advisor or investment manager, can give you the guidance you need to get to grips with investing. These professionals can provide tailored suggestions and direct insights into various investment options, strategies, and market trends to help you make the right investment decisions for your financial future.
While seeking professional advice does come with additional costs, the potential long-term benefits of their expertise, tailored advice, risk mitigation, and ongoing support can far outweigh the short-term expenses. Ultimately, their guidance can help you make more informed financial decisions so you can develop a strong portfolio and increase the likelihood of reaching your investment goals.
Keep Educating Yourself, Stay Updated, and Adjust Your Plans Accordingly
Remember, investing is a journey that requires patience, discipline, continuous learning, and the ability to be flexible with your portfolio. By following the tips outlined above, you can continue to educate yourself, adjust your investment strategy as needed, and stay on track with your goals.
At Flagship Investments, we are dedicated to helping our clients achieve all that and more by providing them with first-hand insights and access to quality investments through our expertly crafted portfolio. Feel free to reach out to us today to chat more about your investment plans and discover how our LIC can help you with your long-term financial goals.
