One goal I promised myself I would keep this year was to start saving harder than ever before, to prove to myself that we as a family can live on less. I’m aiming to save one third of my wage each month, which is quite substantial and will force some considerable adjustments to our budget, but I’m up for the task!
It’s February, which means one month of the year has passed already, so now to plan what to do with the savings I have from January and will continue to grow. I definitely don’t want them stored in a low interest day-to-day savings account on two fronts: I don’t want them to be easily accessible and I want to earn a decent return. I’m happy not to put all my eggs in the one basket, and plan to divvy up the funds across three areas – short term savings in a high interest online account, medium term savings in a term deposit or managed fund and long term savings investing in the stock market. It’s the latter two that I know little about, so I’ve set about researching some information.
I’ve started my research by using a one-stop investing site www.investsmart.com.au . It gives clear and easy to understand comparisons of managed funds across various sectors and strategies (ie. Global shares vs Australian shares). It also provides quick summaries on the highest peforming funds and the most popular funds. The Barefoot investor, Scott Pape, often talks about the Australian Foundation Investment Company. Their investments have regularly made returns at solid rates over decades of years. This is a bit of a hybrid between managed funds and investing in shares, as it is an investment company investing in Australian shares using the pool of multiple investors' cash in the same way as managed funds, but it is listed on the stock exchange so stocks are purchased through brokers in the same way as shares in any public company are purchased. Looking on their website, www.afi.com.au there’s heaps of information on historical returns and dividends paid (these are in February and August). To me, it sounds like an option worth exploring further.
Then there’s investing directly into public companies listed on the stock exchange. I’m more comfortable to invest in companies I know well, so I’ll limit myself to Australian shares. There are many options to set up an online share trading account, whether that be through banks or websites such as www.investsmart.com.au and it doesn’t take a lot of time or effort to set one up, particularly if you go through the bank you currently have accounts with, as proof of identity and documentation required is at a minimum. I have arranged to get an account ready, but haven’t started trading yet. I feel that I need to put some energy into understanding the market further before taking the plunge …. I need more education. I want to know what investment strategy would best suit me? I need to consider such things as high dividend returns vs high unit value growth and how this impacts investments over the long term. How to look at a company’s balance sheet to determine their risk profile? Finance experts provide advice on companies to invest in and their potential growth and value, but who do you trust?
The www.asx.com.au website is an excellent place to start researching EVERYTHING about share trading. There’s an enormous amount of information on potential companies to invest in. The site allows you to put a “watch list” together of the companies you’d like to keep tabs on, so that you can see these particular companies over a period of time and determine how they are performing and when might be the right time to invest. There’s an “education” section which includes information for “first-time investors”. There are tutorials to watch on how the share market works, an online shares course to find out what you need to start trading, investment videos and an investor update newsletter that you can sign up for. Then there’s an opportunity to play the ASX Share Market Game and learn how to trade in real market conditions without risking real money. The game goes for just over 4 months, giving participants a chance to test their strategies and learn from others’ strategies. This sounds ideal for me, so I’ve signed up for the game which starts at the end of February. It’ll motive me to keep up-to-date with the market and I’ll learn lots along the way.
What investment strategies have you employed? Do you have a preference for cash, shares, bonds, property funds, managed funds or anything else? I’d love to hear your thoughts so send me a post or drop me an email at livewelllivesmart@gmail.com
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