So you want to...start investing?

By MAS Team | 31 July 2019

Investing once seemed like something only the financially savvy were equipped for. Now people as young as 16 are starting to invest and be smarter with their money.

If the word investing still makes you want to run for the hills – let us break it down for you.

1. You’re probably already doing it

If you’re in KiwiSaver or another form of retirement fund, you’re already investing, and you probably didn’t even realise it. Remember to be mindful of actively choosing the fund you are in and don’t just settle with the default – growth funds have higher potential returns.

If you’re interested in doing some extra investing outside of your KiwiSaver fund, it’s important to make sure it fits your current financial plan. Do you have existing debts accruing interest? If so, they should be your priority and any additional investing can wait until you are on the other side of debt.

Investing platforms like Sharesies make setting up and running your own investment portfolio very manageable.

2. Let’s get responsible

If investing in ethical companies through your KiwiSaver is important to you, it’s important to understand what your definition of ‘ethical’ is. For some, it will mean not investing in tobacco or alcohol companies, and for others, their priorities may be more environmentally charged and they won’t want to invest in fossil fuels.

Whatever your ethics, there are options out there for everyone. The MAS KiwiSaver Plan has seven different funds to choose from and all of them follow a responsible investment mandate, with their investments excluding companies from the tobacco, weapons and fossil fuels industries.

 3. The power of compound interest

Compound interest/returns can give your investments a real boost. It is essentially interest earned on interest. Reinvesting interest earned on investments = even more interest and extra money for you. Generally, the longer you continue reinvesting interest, the greater the effect compound interest will have, and the more return you will see.

Check out this calculator to work out how much you could save over time with the help of compound interest.

4. The highs and the lows

Just like riding the wave of life, investing isn’t always smooth sailing. When you invest you need to be prepared to ride the highs and lows of the market. It helps to think about what kind of investor you are from the get-go. Ask yourself how much money are you prepared to lose? Are you a risk-taker or a more cautious investor?

If you know your goals and expectations from the outset, that will make the lows much easier to accept and the highs will be even more enjoyable. If you sell when the market hits a low point, your return is likely to be lower than if you ride it out.

5. Variety is the spice of life

Anyone who has watched the highly informative TV show Love Island will know the importance of not putting all of your eggs in one basket. The same goes for investments. You are in a much safer position if you have multiple investments rather than having all your money in one investment that goes bad.

Investing in index funds is a good way to keep things diversified. Index funds are portfolios that track a certain stock market index such as the NZX 50 or S&P 500. It means you’ll own a fraction of many companies – 50 or 500 in these cases – and means if one or two companies don’t do so well you won’t lose everything.

Play the game and keep your options open – check out the MAS Risk Profiler tool to delve into this further.

Please note: This article is of a general nature and is not a substitute for professional and individually tailored advice. Please speak with an adviser before making investment decisions.

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