General Guide to Investing

Reading it will allow you to gain some insight into investing techniques and investment products. But there will always be more to learn. It is more than likely you read something and didn’t quite understand it. This is good. That means you need to do some more research.

That being said, I have a list of several tips for when you are ready to invest.

  1. Past returns on an investment are by no means a guarantee on future returned- they can only ever be seen as a guide.
  2. You need to diversify your investment across different asset classes, industries, funds, and even countries.
  3. Re-invest you divined income and allow the 8th wonder of the world, compound interest, do its thing.
  4. Generally, the higher the returns on an investment, the higher the risk.
  5. A large proportion of your investment should generate money, Cash, Shares, Property, avoid over-investing in assets that don’t, such as Art.
  6. Don’t be discouraged by short term volatility; shares will move up and down throughout the day- you should only be concerned with the long term trend.
  7. When comparing investment, make sure the returns you compare are the same. Don’t compare apples to oranges.  Some returns are calculated gross, and some are calculated net.
  8. Use dollar-cost averaging for volatile investments; this lowers your risk of timing an investment.
  9. Investing is a long term endeavour. Don’t check you investment every few days.
  10. If possible, seek professional advice and independent advice. Be wary of getting rich investment advice from friends and acquaintances.

And here are some general guides into choosing investment vehicles.  Keep these in mind and go through them before you purchase into an investment.

  • How liquid is the investment, and how liquid do you need the investment to be
    • how easy is it to get your money back if you need it
  • Are there any entry and exit fees, how do they compare to other similar investments
    • Sometimes it isn’t as clear as it should be the fees involved with some investments
  • Are there any tax implications you need to understand
  • Have you read all the information that has been provided
    • What about looking on Reddit or other forums to see what other customers have to say
  • Are you comfortable with the company or organisation that you are investing with
  • And if you don’t understand anything, or are uncomfortable with anything, don’t invest. Seek independence advice.

And please remember that Passive Income NZ is not a financial adviser and if you are confused about anything, you should seek professional advice before making any investment decision. Please read my disclosure for more information. In NZ, Sorted has some useful information to consider when seeking financial advice, or visit the Financial Markets Authority, which has more resources to help you out.

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