Helen Baker is a licensed Australian financial adviser and author of the new book, Money For Life: How to build financial security from firm foundations. (Source: Supplied\/Getty) <\/p>\n
With savings accounts currently offering around 4.5 per cent interest, while investments historically averaging returns around 10+ per cent, it\u2019s easy to see why investing trumps saving. And you can start with as little as a handful of change.<\/p>\n
\u2018Microinvesting\u2019, as it\u2019s known, involves investing with small sums of money. It is popular with young people and those on lower incomes. Others have never invested before and want to start small before progressing onto bigger things. Banks and a swathe of specialist apps now allow microinvestors to take that step<\/a>. To get started on your own microinvesting journey, ask yourself these questions:<\/p>\n What is my goal?<\/p>\n Knowing what your goal is will help you determine whether microinvesting is really for you, how to go about it and how long your money is invested<\/a>. If you\u2019re a novice investor and your goal is to dip your toe in, bingo! This could be a great way to build your confidence and test your strategy. However if, for example, you\u2019re saving up that first home deposit, the First Home Super Saver (FHSS) scheme<\/a> may be a better \u2013 and more tax effective \u2013 option.<\/p>\n What is my budget?<\/p>\n \u201cMicro\u201d means different things to different people. You may be starting with $5, $50, $500, $5,000 or more. It\u2019s important to set a sustainable budget, no matter the size of your investment. Never invest more than you can afford to lose. And don\u2019t kick off your microinvesting journey by pushing yourself into debt. In fact, a better investment is usually to wipe out your debts first.<\/p>\n Which platform will I use?<\/p>\n Choose your platform wisely, as they are not all the same. Differences include:<\/p>\n Costs and fee structures (fixed fees or per trade)<\/p>\n Services and usage restrictions<\/p>\n Investments offered<\/p>\n Minimum investment amounts<\/p>\n User interface (you may find one easier to use than others)<\/p>\n Go for a reputable and licenced app. Comparison sites like Canstar<\/a> and Finder<\/a> allow you to compare reviews and ratings for different apps before signing up. However, don\u2019t spend so much time trying to find \u201cthe best\u201d platform that you don\u2019t actually make a start.<\/p>\n What will I invest in?<\/p>\n What you invest in will be heavily influenced by what we call your \u201crisk appetite\u201d. You could choose shares (for as little as 65 cents each on the ASX), managed investment funds known as Exchange Traded Funds (ETFs), Real Estate Investment Trusts (REITs), bonds, or commodities (like gold). Often, lower risk investments deliver the lowest returns \u2013 like cash in a savings account. Meanwhile people choose higher risk investments as a calculated risk that they will generate higher returns. Your values will also come into play. Some people choose ethical investments that do good for people and\/or planet, or specifically avoid particular industries.<\/p>\n What is my strategy?<\/p>\n An investment strategy is more than just \u201cbuy low, sell high\u201d. It should:<\/p>\n outline your appetite for risk, which may change over time with age and life events<\/p>\n diversify your assets to hedge your bets against losses<\/p>\n detail your approach to managing foreseeable risks (for instance, will you be forced to sell your investments if you lose your job or suddenly need that money back?)<\/p>\n stipulate an exit strategy (such as selling out to explore more sophisticated investment options)<\/p>\n Having all these points considered and documented will help you keep you aligned to your goal.<\/p>\n Whose name will go on it?<\/p>\n This step is easily overlooked but can have substantial implications. For couples, it\u2019s usually more tax-effective to have investments in the name of the partner with the lowest income. But conversely, this may affect any Centrelink entitlements they receive. Retirees need to explore whether an investment in their name would affect their pension rights. Meanwhile, investments in children\u2019s names can attract tax as high as 66 per cent<\/a> if they generate yearly returns over $416.<\/p>\n How can I make the most of it?<\/p>\n To really make the most of your efforts and ensure your money works its hardest for you, try:<\/p>\n Making it part of your routine: check in regularly to stay interested, make tweaks where necessary, and invest new money you\u2019re putting in. Certain microinvesting apps also charge an inactivity fee, making a \u2018set and forget\u2019 mentality especially costly.<\/p>\n Reinvesting your proceeds: don\u2019t pocket returns (like share dividends) but reinvest them to benefit from compound growth.<\/p>\n Automating transfers: automatically transfer a set amount from you bank account each payday to your microinvesting app to avoid forgetting or being tempted to spend that cash.<\/p>\n Getting professional advice: a qualified financial advisor and an accountant will help you avoid unforeseen tax, pension and other nasty surprises and ensure your investing efforts aren\u2019t in vain.<\/p>\n Starting to invest, even with a small amount, is a great first step towards building long-term wealth. You\u2019ll find a little bit of diligence at the outset goes a long way towards growing your money and your confidence!<\/p>\n Helen Baker is a licensed Australian financial adviser\u00a0and author of the new book,\u00a0Money For Life: How to build financial security from firm foundations (Major Street Publishing $32.99).\u00a0Helen is among the 1% of financial planners who hold a master\u2019s degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children.\u00a0Find out more at\u00a0www.onyourowntwofeet.com.au<\/a><\/p>\n Disclaimer: The information in this article is of a general nature only and does not constitute personal financial or product advice. Any opinions or views expressed are those of the authors and do not represent those of people, institutions or organisations the owner may be associated with in a professional or personal capacity unless explicitly stated. Helen Baker is an authorised representative of BPW Partners Pty Ltd AFSL 548754.<\/p>\n","protected":false},"excerpt":{"rendered":"Helen Baker is a licensed Australian financial adviser and author of the new book, Money For Life: How…\n","protected":false},"author":2,"featured_media":301410,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[45,49,48,133,1385,9039,131,132],"class_list":{"0":"post-301409","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-ca","10":"tag-canada","11":"tag-finance","12":"tag-investment-strategy","13":"tag-investments","14":"tag-personal-finance","15":"tag-personalfinance"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/301409","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=301409"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/301409\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/301410"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=301409"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=301409"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=301409"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}