A reader recently asked me whether I ever get nervous before a big investment, like buying shares. A better question would perhaps be when am I not nervous? Although my post today takes investing in the share market as an example, it’s really relevant to almost any worry. Not only investing anxiety and money troubles, but general concerns that keep you up at night.
Diversification is an important topic, but one that isn’t well understood. And I don’t just mean by the general public. Investors aren’t great at understanding it either, apparently. Less than half of investors surveyed by the ASX (46%) claim that their portfolios are invested. And even that group holds just 2.7 financial products on average. A further 40%, who held 1.6 products on average, said they knew their portfolios were not diversified enough. But most worrying of all, 15% of investors admitted they didn’t know if their investments were diversified or not.
So how do you know if your investments are diversified? Or if they are diversified enough?
What do you think of when you read the word ‘investor‘? What mental image springs to mind when you hear that word?
Perhaps you’ve heard this riddle: A father and son are in a horrible car crash that kills the dad. The son is rushed to the hospital; just as he’s about to go under the knife, the surgeon says, “I can’t operate—that boy is my son!” Explain.
In one of the older posts here on Enrichmentality, we talked about financial resources being a bit like milk – in some cases, the older they get, the more off they are. So the time of production of any advice is important. Especially in the case of highly-specialised, subject to frequent change information. Like interest rates or tax rates or first home owner’s grants. But how much should we worry about where our advice comes from? Is there such a thing as too much American influence?
This week, we turn to another reader’s question, on the topic of investing. Specifically, getting started investing as a student. (Although this information is relevant to anyone investing, especially in the Australian market, for the first time).
In the last post, we looked at the buzzword ‘negative gearing‘ (where the interest you are paying on the loan is more than the income), and why positive gearing (where your income is more than the interest) can be more attractive. But for anyone looking to retire early, or have the financial freedom to quit their job, pursue creativity, or raise a family, the concept of cash flow is perhaps even more important to know about than gearing. And it’s something we all need to know about – not just investors.
Last week we looked at the two ways you can earn money through investing: income and growth.
But how do you know which style is right for you?
It’s important that your investment strategy is aligned with your purpose. We all have different goals, and this means that a one-size-fits-all approach to investing simply won’t work for you.
According to Investopedia, investing is
Note that it says “the expectation of additional income or profit”. It’s far from guaranteed. But just how can you make money from investing?
Over the weekend, having recently returned from our overseas odyssey, I was thrilled to attend the opening of Hope: From Robe to Riches. The brainchild of my dear friend, and one of Enrichmentality’s first believers, Dr. Joanne Sullivan, the exhibition is currently on display at Gum San (金山) in Ararat. And it’s an exhibition that got me thinking about the concept of investment.
I’ve been doing a lot of reading – and thinking – about retirement for a new project. In the last few posts, we’ve looked at net worth (including your home), and retiring. But what is the difference between ‘traditional‘ and ‘early‘ retirement? In this post – the 100th post on Enrichmentality! – we’ll tackle this question.