So, you want to start investing.

Building up investments over time can be a way to build wealth for yourself and your family.

If you’re wondering where to begin, there are a few things to note.

What is investing, anyway?

When we talk about investing, we mean putting your money into things like shares, managed funds, or other financial assets that are expected to grow in value or generate income over time.

Unlike savings accounts, which can often lag behind the rate of inflation and lose their purchasing power over time, the value of your investments should generally grow over the years (perhaps with a few ups and downs along the way – more on that in a moment).

What are your goals?

It’s important to know what you want to achieve from your investments before you begin.

Are you wanting to build up assets that could work alongside KiwiSaver for your retirement? Are you hoping to invest for a shorter time horizon to give you funds for kids’ education? Or do you want to move towards financial independence?

Knowing what you want to invest for, and what sort of time horizon you have, will influence the sorts of investments that are appropriate for your situation and objectives.

In general, people who are planning to invest for the longer term may be able to tolerate more risk, which may mean higher returns than lower risk investments. A SHARE adviser can help assess what your personal risk profile is and discuss how that fits in with your investment goals.

How much do you need to invest?

You might not need as much money to start investing as you think.

There are several ways you can start investing in shares, managed funds, or ETFs — even with a small amount — and build these up over time with regular contributions.

When you are younger, the power of compounding returns over a long period of time will help to boost the value of your investment.  

That means someone who starts saving later will typically need to contribute more to catch up to someone who started earlier — even if that person only made smaller contributions — because compounding returns have not had as much time to grow their balance.

Diversification is your friend

When it comes to investing, investors are usually told not to put all their money into one asset or even one asset class.

That’s because, if trouble were to strike for that particular investment, you could see a dramatic drop in your investment value.

If you instead spread your risk across a few different investments, it’s less likely that they will all hit a rough patch at the same time.

As a starting investor, it can be hard to achieve diversification if you don’t have a lot of money to invest.

Managed funds can help, because they pool your money with others and spread those funds across different investments. Your SHARE adviser can help you determine what might be appropriate for you.

Markets will move

Markets do move, and whatever you decide to invest in, it’s likely that there will be periods where the performance doesn’t fit your ideal scenario.

It’s usually important to stick with it, provided you have a plan and know why the funds you are invested in are appropriate for you.

Investors who sell when the market wobbles may find they have sold when prices were at their lowest and risk missing out on the subsequent pick-up as they rebound again. You may not know prices have started to increase again until they’ve already lifted quite a bit.

Your SHARE adviser is here to help if you have any concerns about the performance of your investments.

Ready to get going?

If you’re keen to get started with investing, get in touch with the team at SHARE today. Our expert financial advisers can help you to determine an investment strategy that suits your circumstances and goals.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.