Best investment tips for beginners

You can begin building a portfolio that combines safety, income, growth, and investment basics by understanding the basics of investing.

Financial planning allows you to determine your best investment, and then create a plan that will help you reach those goals. It is a good idea to start by reviewing your financial situation, future goals and anticipated changes.

The goals and tolerance for risk in your investment strategy will then be reflected in your investment strategy.

The financial planning process will help determine how much and for how long you need to invest in order to finance your children's education, purchase a home, or save money for retirement.

This guide offers tips to help you think about the following:

1. What is the difference between investing and saving?

Saving refers to putting aside money that you don't use now in a PureSave account or Flexi Advantage account. You can access your money quickly and with little risk.

Investing means buying assets like shares, unit trusts or property in the hope that you will make money. Investing can often achieve long-term goals. Investments can help you make money work for your benefit and create and preserve wealth.

Your goals and risk tolerance will determine whether you save or invest.

2. Defining your investment goals

Before you purchase, it is important to know your investment objectives. Ask yourself these questions:

• Why should I invest? (To buy a house, to build a retirement plan, and pay for my children's education.
• What type of returns can I expect?
• How much of my net worth would you like to invest?
• What are the goals of the gains? What number of years do I have?
• What is my investment goal? What is your investment objective? Capital appreciation, capital preservation or income growth?
• How much risk will I take over the long-term?

Next, evaluate your risk appetite. Some people will be satisfied with a low risk, low return option. Others may prefer to take a short-term loss in exchange for long-term gains.

3. Investment goals for the short-term and long-term

You might have short-term goals such as saving money for your dream vacation, setting up an emergency fund, or saving enough to pay for a car deposit. Fixed income investments can be a good option for these goals, as they have a lower risk than equity investments. Equity investments require longer periods because of the risk. Unit trust funds are a type of fixed income investment that is flexible and easily accessible. These funds also offer higher interest rates than traditional bank deposits.

Before you make a decision, it's worth looking at different rates and the expected returns.

Future-forward investing

You can decide how long you are willing to invest to help you choose the right investment options. Riskier assets such as property or equities are better for long-term investments.

An investment that is well-made will increase in value over time. However, to fully take advantage of this opportunity you must be willing to let your money go without your control for a significant amount of time.

You can think of buying bonds, shares, mutual funds, or property with money you won't need for the near future. Compound interest is a key to long-term investment success. It allows you to earn interest. This is a great way to allow your money to grow long-term.

It doesn't matter what time frame you have, short-term or long-term. It is prudent to keep a diverse portfolio of investments.

Income versus growth

The key to investment planning is to decide whether you are investing for income, growth, or a combination of both.

This will allow you to choose between growth and income assets.

• Growth assets: A growth asset is one that aims to increase the amount of money invested, sometimes by a fixed amount. This investment can be primarily equity or property. It is designed to provide large capital growth returns over time and protect your investments from inflation. It is not a good idea to invest in growth assets for a shorter time as they tend to be less stable.
• Income assets: A fund that invests in income assets will earn earnings from the dividends paid by the companies to which it is invested. These income include cash, bonds and property, as well as certain equities. These investments are more stable but often return lower returns. These assets are ideal for those who need income as their primary source of income.

Investing in your child's education will be more time-consuming so a stable income asset is best. However, investing in retirement would require large capital growth from growth assets.

Do your research

Investment decisions are key to achieving good returns. Experts in financial services warn against investing without having a good understanding of the investment you are making, particularly if you plan to do it yourself. Learn as much as you can about investing and get to know the terminology by reading articles, watching videos, listening to podcasts, and speaking with advisors.

Talk to your financial advisor, investment manager, or stockbroker if you prefer personal contact.

4. Know your appetite

This is how you can find out what works best for you. High returns, but without risk, are not possible. Higher returns come with higher risks. Three things may influence your tolerance for risk:

• It doesn't matter if you want to keep your money safe.
• You may be looking for higher growth.
• When you have to spend money

A realistic understanding of the possibility that expectations and actual returns may differ should be part of your investment plan. This is how much risk you accept. This information is an important part in developing your investment plan.

5. Set investment goals that will yield a return

Your money's purchasing power drops as inflation rises. You must beat inflation to save for your child's education.

Savings can be more expensive than investing. This could make it difficult to reach long-term goals such as retirement. Saving in a bank account is an option if you are able to save 15% or more of your monthly income.