You might think the most important factor in starting an investment portfolio is the amount you have to invest but really the most important factors are you, your goals, and your plans for the future. Here’s how to get started …
1. Look at your current finances
It’s important to know where you are with your finances before you start investing. It might be tempting to dive right in, but you’re better off paying off any high interest loans or credit card debt before you look at buying stocks.
2. What are your goals?
Break your goals down into short, medium, and long term. For example:
• a short-term goal might be paying off a small loan within a year
• a medium-term goal might be buying a house within 5 years
• a long-term goal would be building a retirement pot
In this step it’s very important to think about future finance allocation. Can you afford to invest money now if you need to save for a house deposit? An underrated goal is building an emergency fund for when you have a sudden roof leak, a car breakdown, a large vet bill, or anything else life cares to throw at you.
3. Work out your risk level
All investing involves some risk tolerance, but investors can always err on the side of caution especially when markets are volatile. It’s important to allow for some financial flexibility and not to rely exclusively upon potential income from investments, especially if you are investing in equities over bonds. To work out your risk level, a great first step is to talk to a financial advisor and take a risk assessment quiz. Members of The Gloss x Goodbody Investment Club can avail of a chat with financial advisor, Jennifer Graham. Reach out to Jennifer at Jennifer.m.graham@goodbody.ie to book an appointment.
4. Decide upon your asset allocation mix
A term like “asset allocation mix” sounds fancy, but really it just means deciding where you want your money to go. Are you happy to buy stocks and hope for good rewards, or would you rather invest in a bond and get a fixed income return? It’s important to research all the options and read the fine print. Align your investments to all your goals outlined in step one. Don’t invest in a 10-year bond if you’re hoping to buy a house within 5 years. There are so many products on the market that it can be confusing, which is why a financial advisor can really help.
5. Stay financially flexible
As the saying goes, God has a good laugh when you tell him (or her) your plans. Make sure you can access part of your wealth if your circumstances change, your future self will thank you for it.
6. Keep your eye on the ball
We’d love to tell you that now you can just relax and watch your money roll in, but this is just the beginning of the journey! Think of your portfolio like a beautiful garden. Gardens require a lot of upkeep, between planting seeds, getting rid of weeds, raking leaves, and cutting the grass. Your future wealth requires the same level of attention and work. Keep up to date with market movements, look at trends, opportunities and think about what will work best for you. Flowers don’t bloom overnight and neither does wealth. A financial advisor can ensure that you don’t accidently plant sunflowers in the shade. Get very clear on your goals and work towards them with patience.