Hello Fellow (or Future) Investors,
Investing can be an exciting opportunity to build wealth and secure your financial future – but it’s not for everyone. Before you take the plunge, ask yourself these four critical questions:
1. Do you have the risk profile for it?
Investing involves risk. Markets rise and fall, and during downturns – like the COVID crash – many investors sold at a loss because they couldn’t handle the volatility. Successful investing is about time in the market, not timing the market. If short-term drops make you panic, investing may not be the right fit for you.
2. Do you want to buy a property soon?
If you’re saving for a home in the next five years, investing in shares might not be ideal.
Market fluctuations could impact your ability to reach your property goal within your timeframe. In this case, a more stable savings strategy may be better.
3. Do You Have Adequate Savings, Cash Flow and Personal Insurance?
If you’re living pay check to pay check or have minimal savings, investing could put you in a tough spot.
You’ll want to have your personal insurances sorted to ensure you are covered should something unexpected happen – like an illness or accident – which could negatively impact your cash flow.
By the same token, pulling money out early to cover unexpected expenses will undermine your investment growth. It’s important to build a solid emergency fund first.
4. Do You Have Equity in Your Property?
Many first-time buyers start with a 5% deposit, meaning they have little equity in their property. If you had 40% equity on the other hand, you could leverage it to invest in other assets and accelerate wealth creation. Without this buffer, investing might stretch your finances too thin.
If these points don’t apply to you, investing could be a smart move toward building long-term wealth. Speak with a trusted financial planner like Fleming Financial Planning in Brisbane to create a strategy tailored to your goals.
Joshua Napier
(Provisional Financial Planner)