Investments for the future – your long term security.

About Investments

Investing is about using your money to build wealth. And investments are more than just saving money – they’re about building wealth for the long-term security of you and your family, including planning for your retirement.

How much money do you need to invest?

Well that depends on the purpose of your investing and therefore how much money you need. You may be investing your college eduction for your children, or investing for retirement. As with all financial goals, the key is knowing what your real target is and then working out how to achieve it – and whether your budget can afford it!

Investing for retirement is critical if you want to retire in comfort, as most welfare schemes for aged care are basic to say the least. Think about what you may want to do when you retire – are you going to travel the world, or will you be just as happy sitting at home knitting.

Your retirement plans will have a significant impact on how much money you’ll need, but typically people will need to have saved 10 times their current income to live in the same level of comfort.

If you’re serious about investing money for the future, it’s worth talking to a financial consultant about your options as poor advice will set you back years.

The Science of Getting Rich - Using The Secret Law of Attraction to Accumulate Wealth

At seventy years of age, Bob Proctor is widely considered one of the world's greatest authorities on attracting wealth! He is an internationally sought-after speaker, who recently starred in the movie The Secret, all about The Law of Attraction. His teachings come from Napoleon Hill's Think and Grow Rich, and other sources. His delivery is high energy, entertaining, impactful, and thought-provoking. This bestselling Seminar on DVD will help you to expand your possibilities, think outside the box, become a money magnet, overcome negative money beliefs, and much more.

How Investments Work

To understand how investing works, you need to understand the following concepts:

Rate of Return: The rate of return is simply the % of your initial investment value that you expect to make. If you put money into a bank account that has an interest rate of 5%pa, the rate of return is 5% pa. That means if you put $100 into this bank account, you will make $5 in interest per year.

Returns of greater than 10% are good.

The higher the rate of return, the more money you make. Which leads me to the next concept…

Risk and Return: If you make more money from investments with a high rate of return, then why not put all your money into ones with a high return? Well the answer is that the higher the rate of return, the riskier the investment.

Betting on a horse at 10:1 is a risky bet, but boy would it return well if it won!

All companies want you to invest money with them. High risk companies really want your money so they can expand or for doing research into their products. But because they are high risk, they know that people are less inclined to invest money with them. So they offer an incentive by offering a higher rate of return.

Investments with a high rate of return are good, but remember that there is a risk that you may lose money on them.

Generally, the older you get, the safer your investing becomes – because you’ve got more to lose and less time to gain the money back.

The golden rule with investing money in high-risk ventures is to never invest more than you’re prepared to lose – because you might.

The second golden rule is to diversify your interests [that is, invest in a wide variety of products],so if one fails you don’t lose everything.

Compound Growth: You may have seen the episode of ‘Futurama” where Fry checked is old bank account after 2000 years, and it went from 79c to $40 million – well that’s the power of compound growth, which quite simply is when you reinvest a ‘return’ into the same investment.

For example, if you put $100 into a fund that returns 10% every year, you will return $10 every year. If you put this $10 back into the same fund, you will start returning more and more every year as you start making returns on the returns. And the higher the rate of return, the better the result!

The following graph shows the concept of compound growth [based on investing $1] over a 30 year period for a few different rates of return.

Capital Growth: Capital growth occurs when you own something and the value of that something increases over time. For example, if you purchase a house for $100,000 and sell it for $120,000, you have experienced a capital growth of $20,000 or 20%.

The same applies to shares for example, if you purchase shares for $1.00 per share and sell them for $1.20 per share, you have experienced a capital growth of 20c per share or 20%.

Of course, one of the golden rules of finance is that you can’t get something for nothing – in the case of investing, that means that you need to spend money to make money!

Many people actually borrow money to invest, which is why it is so important to make wise and informed decisions about investing. See a reputable financial advisor or accountant for advice before committing to ANY investment – and don’t fall for many of the investment scams around.

So what can you invest in?

Now that you understand the basics, let’s look at some options.

Cash – this is the most common way to make money. You put money in a bank account, and the bank pays you interest. This is low risk, but low return. Talk to your bank about options – long terms deposits can give you a better interest rate, but will have restrictions on access to your money and maybe even minimum deposits.
You can also invest in overseas currencies and capitalise on the fluctuations on the foreign exchange rate. Some people do this on a daily basis and can make very high returns, but this is a risky business.

Gold bullion – you can invest in gold stocks. Gold is a limited resource, hence its value is always maintained and is not subject the fluctuations of the foreign exchange rate. Gold is a good long-term, low risk (and low return) investment.

Property – the old ‘bricks and mortar’ is still seen as a good solid option that works on the principle of capital growth. Even the house you live in can be classed a property investment – it will increase in value, provided you look after it of course! And you can increase its value by strategic renovations and good maintenance.
You can also buy property specifically for investment purposes. In this case, it’s worth selecting the location well [it’s all about Location, Location and Location!] – buy the worst house in the best street, rather than the best house in the worst street. You can then seek tenants to lease this property to help pay off your mortgage!
There are lots of rules and tricks of the real estate trade to optimise your property purchase – know these and make the most of any advice you get.

The Stockmarket – shares, stocks, bonds. These work on the principle of capital growth (of the share value for example) and return on investment in the form of a dividend payment. Some investors (called day traders} buy and sell shares on a daily basis to make the most of daily peaks and lows on the share price – this can be risky, but can also give high returns.
Most mum and dad investors purchase shares for the long term, making the most of long-term capital gain and reinvesting the annual dividend payments back into the shares.
But beware, the stockmarket is a jungle full of snakes and lions – so don’t go in unprepared! Get advice from a reputable stockbroker and diversify!

Managed funds – if you’re not sure what you want to do, a managed fund from a reputable finance institution can be a good option, offering moderate returns and moderate risk. The Financial Institution will have a range of packages available – ranging form low risk/ low return to high risk/ high return – so there is usually something for everyone.

If any of the above options interest you, seek appropriate advice before committing your hard earned cash.

What investment goals do YOU have?

There is an Investments Record in the ToolBOX under “Financial Tools” - you can use it to keep track of what investments you have.