“I want to invest, I just don’t know where to start!” Sound familiar?
You probably have a list of questions that are preventing you from starting your investment journey. David Booth, the Executive Chairman and Founder of Dimensional Fund Advisors outlines 10 obstacles people often encounter and how to overcome them which most of us can probably relate to.
1. WHY INVEST IN THE FIRST PLACE?
Whilst investing your hard-earned dollars comes with a level of risk and trepidation, by not investing you’re running the risk of your money having less value in the future because of inflation. There is the very real risk of outliving your money by not investing.
2. I’VE LEFT IT TOO LATE.
It’s never too late to start your investing journey. The train hasn’t left the station, you just need to board it.
3. WHO DO I TRUST?
Whether it’s your neighbour giving you a “hot” stock tip at a BBQ or the latest “Fin-fluencer” on Instagram, it’s important to cultivate a healthy sense of scepticism. A good place to start is with a CEFEX accredited financial adviser who has your best interest at the forefront.
4. HOW DO I TIME THE MARKET?
You can’t. The overwhelming empirical evidence is clear that you can’t time the market (buy low sell high) and consistently beat it over the long-term. Deciding to become a long-term investor takes the timing debate off the table.
5. I’M AFRAID TO LOSE IT ALL.
If you have all your eggs in one basket, there is a higher risk of you ‘losing it all’ than if you were to have a well-diversified portfolio.
6. I DON’T KNOW WHAT I DON’T KNOW.
If investing was a ‘sure-thing’ with no uncertainty, everyone would do it, but then there would be no positive expected payoff. A financial adviser can help guide you through and establish a plan to provide you with some certainty.
7. WHICH COMPANY SHOULD I BUY?
Every company on the market is competing for your investment. Rather than trying to identify the next Amazon or Netflix, choose from a broad range of companies instead of trying to outguess the market.
8. WHEN IS THE NEXT FINANCIAL CRISIS?
Dot-com bubble, GFC and a global pandemic. History shows that there will be another crisis, but it’s important to be reminded that markets have continued to deliver positive returns once things have settled down.
9. I’M OVERWHELMED, THERE’S TOO MUCH TO THINK ABOUT.
Beware of analysis paralysis – stopping yourself from taking the investment plunge due to over-thinking. This is where a financial adviser can really help discern fact from fiction.
10. HOW MUCH DO I NEED TO INVEST?
How long is a piece of string. There is no blanket rule, it comes down to how much you are willing to put aside today in hopes of a more prosperous tomorrow.
If you would like to discuss the above further or start your own investment journey, feel free to give us a call.
Ben Cole
Associate Adviser
BBus (Acc) GradDip FinPLan
