So, you’re travelling along nicely with your finances. You’ve got your income and expenses covered, your budget is working well, and that savings plan you put in place is looking very healthy.
You know that just having that money sitting in the bank, doing not much more than generating a small amount of interest, isn’t financially smart. Establishing an investment portfolio can be a good choice to get your money working harder for you.
But there’s a few things you should know before you jump in.
Choosing investments for your portfolio is not easy. You clearly want the ‘best’ investments, but you need to make sure that the investments you choose are appropriate for your circumstances and goals.
Firstly, what are your short and long-term financial goals? What is your ‘risk profile’? Risk relates to return – generally, the higher the expected return, the higher the risk; the lower the expected return, the lower the risk.
What’s right for you?
Some people are comfortable with higher risk investments because they offer the opportunity for higher returns, others are more conservative and prefer less risky investments such as fixed interest. When selecting your investments, it’s important to understand that the level of return will differ.
Once you have established your risk profile – from conservative through balanced to growth – you can choose investments to suit your risk profile.
Options you can choose for your investment portfolio include:
Cash – low risk, low return
Fixed interest – low to moderate risk, moderate return
Property – moderate to high risk, moderate to high return
Shares – high risk, high return
Spread your risks
Don’t put all your eggs in one basket! Diversification is vital because the positive returns you receive from one investment can generally offset any negative returns you may receive from other investments.
Financial advice makes a difference
There are a lot of issues to consider in choosing the appropriate investment mix for your needs and goals and a professional can help you make the right decisions.
The Bridges Lake Macquarie team would be happy to speak to you about your investment options. The initial consultation is complimentary and obligation-free.
Bridges Financial Services Pty Limited (Bridges). ABN 60 003 474 977. ASX Participant. AFSL No 240837. This is general advice only and does not take into account your objectives, financial situation and needs. Before acting on this advice, you should consult a financial planner.