Plan, research, and diversify — these are the keys to successful investing. They'll help you find investments that fit your risk tolerance and investment time frame. And help you reach your financial goals sooner.
Golden rules of investing
Before you invest
- Pay off your debts first — pay off any loans, such as a credit card or personal loan.
- Have emergency savings — aim to have enough set aside to cover three months’ expenses, so you don’t have to sell an investment if you need cash quickly.
Prepare to invest
- Develop an investing plan — define your financial goals, risk tolerance and investment time frame. Be realistic and make sure you are comfortable with your choices.
- Research different asset classes — understand the risks and returns of different asset classes, and how they can help you reach your financial goals. Higher returns mean higher risks or even a scam.
- Understand what you're investing in — understand the pros and cons, and make sure you can explain how it works to someone else. Look at the fees and charges, and legal and tax implications. Understand whether you invest directly or do you need to invest via a broker or fund manager?
- Beware of investment scams — keep an eye on warnings and alerts, and read about how investment scams work. Be cautious when transferring money for investments and always cross-check the bank account details. Independently look up contact details for a financial firm using AFCA's list of providers.
- Consider getting financial advice — financial advisers can help you develop an investment plan and discuss your goals in detail. If you don’t want to use an adviser, consider discussing your investment plans with a trusted friend or family member to get a second opinion.
- Diversify your investments — spread your money across and within asset classes to lower your portfolio's risk.
Monitor your investments
- Keep track of your investments — keep your paperwork and review your investments regularly and make sure you're on track.
- Have an exit strategy — check how you can get your money back if you need to. Are there fees for withdrawing your money early? Can you easily sell your investment if you need to?