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Investing

VIEWS: 69 PAGES: 21

									  Reasons for
Investing Money
               Investing
 An  investment is anything you acquire for
  future income or benefit.
 Investments increase by generating income
  (interest or dividends) or by growing
  (appreciating) in value.
 Income earned from your investments and
  any appreciation in the value of your
  investment increases your wealth.
         Reasons for Investing
 The main reasons for investing
 include:
     Earning an income
     Minimising taxation
     Capital growth of original investment
     Offsetting inflation
     Building wealth for the future
                   Investing
    Big Picture. . . Regular Investing
 The
 Adds Up
     It's better in the long run to invest small
      amounts regularly than to invest larger sums
      occasionally.
     How much should you invest each month?
      More is better, but some, even small
      amounts, will add up over time.
     For Example:
             Compounding
 Instead of waiting until you have a lump
 sum of money, it's better—and easier—to
 invest smaller sums regularly. If you wait
 until the end of the year to put $3,000 in
 your account, after 30 years it will be worth
 $657,304 (assuming an average return of
 11.5%).
               Compounding
   That sounds pretty good, but if you invest that
    $3,000 in equal instalments of $250 each month
    over a year, and keep it invested for the same
    30 years, your Investment will be worth
    $782,274!
   The extra $124,970 that you will have at
    retirement is your reward—thanks to the power
    of compounding—for putting your money to work
    earlier
 Common types of Investment
 Cash in term deposits
 Cash management trust
 Debentures
 Shares
 Property
 Tax minimisation schemes
               How to Invest?
 Your    Investment Strategy
     A strategy must be based on your goals and
      needs.
     Every person invests differently based on
      goals, timing considerations, risk tolerance,
      willingness to delegate, and knowledge.
     There is no "best" approach to investing that
      guarantees success.
 Considerations when investing
 Which investment and institution an
 investor chooses will depend on:
    The amount of money to be invested
    The degree of risk an investor wishes to
     take
    The length on time the investment is to
     last
                Investing
 Riskand Reward are the two most
  important considerations of investing.
 Spreading your risk keeps you safer.
                         Risk
   investing, risk is the chance of losing
 In
  money.
      People ordinarily do not take a financial risk
       unless there is also a chance of making
       money or being rewarded.
                                             HIGH RISK


                       MEDIUM RISK
                                            Starting a
                                            business, Tax
LOW RISK                                    minimisation
                         Shares, Property

       Cash, Term
       deposits
           Investing Basics
   Beware of the "Sure Tip"
    Investment ideas often sound tempting,
    particularly if they come from a
    professional. Some companies pay their
    sales staff a commission to sell certain
    investments.
           Investing Basics
   Understand Risk and Reward
    Investment risk means you can tolerate
    some losses while waiting for some
    gains.
   The amount of risk you can stand is the
    amount that will let you sleep at night
    while your money is invested.
           Investing Basics
   Know Your Risk Tolerance
    You can determine your tolerance for risk
    by completing any of the questionnaires
    available at financial publications.
   E.g. Kiplinger's
            Investing Basics
   Spread Your Risk
    Don't put all your eggs in one basket.
    Take advantage of the benefits of
    diversification (spreading out your risk)
    and asset allocation (investing in a
    variety of funds).
          Investing Basics
   Don't Believe in Market Timing
    Research has shown that attempts to
    "buy low and sell high" often fail.
              Investing basics
 Do   your research
     You will be a calmer (and maybe richer)
      investor if you do your homework.
           Investing Basics
   Keep Your Costs Low
    Do your own research to find quality
    investments.
              Investment Options
   There will always be someone willing to take
    your money off you. The key things to
    remember however include:
       Investing is not a get rich quick scheme. Smart
        investors always take a long term view.
       If it sounds too good to be true, then more than likely
        it is!!!!!
       Higher the risk = higher the reward!
       Lower risk = lower reward!
           Investment Options
   Stocks – Owning part of a company
   Bonds – Lending your money
   Mutual Funds – Investing in many companies
   Individual retirement accounts – Superannuation
   Housing – Buy your own house / rental
    properties
   Start your own business
   Other investment options – For example: Land,
    coins, antiques, art

								
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