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).
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?
When it comes to talking about retirement, it surprises me how often I hear people say things such as ‘the government won’t let me retire until I’m 65’. Or, ‘by the time we’re ready to retire, they’ll have pushed it back to 70’.
But there’s no reason to assume that your retirement age will be the same as your superannuation preservation age or your pension eligibility age.
‘Invest in me, and God will invest in you’. This is how Tanya Levin characterises the message of those who preach ‘prosperity gospel’, one of a number of closely related teachings also known as abundant life or seed faith. ‘Refuse, and you only have yourself to blame’.
Prosperity gospel or theology is defined as ‘a religious belief among some Christians who hold that financial blessing and physical well-being are always the will of God for them, and that faith, positive speech, and donations to religious causes will increase one’s material wealth’. Although Enrichmentality is not a religious blog, prosperity gospel lies at the intersection of the two topics this site deals with: language (‘positive speech’) and money (‘donations’). The lessons from this example are far reaching.