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If you're thinking of investing, the first thing you need to do is work out what your personal and financial goals are. Identifying the things in life that are important to you, like owning a house, starting a family or having enough for the kids' education will help you work out the lifestyle you want and the amount of money you'll need to achieve it. Understanding your goals will Gladstone Accountants you the basis for developing your investment or financial plan.
Gladstone Accountants  financial health check can help you get started. By answering a few simple questions, you'll see what shape your finances are in and work out where you might need to make some changes to meet your financial goals.

Five simple tips to start investing

Here are five simple tips for investing that will help you get started:

• Identify your personal and financial goals
• Make a budget and work out how much you have to invest
• Work out what sort of investor you are and how much risk you're willing to take
• Start investing. The sooner you start the sooner you'll reach your goals
• Get good advice. A financial adviser can develop a plan tailored to your personal needs and goals.

How much do I need to invest?

No matter how little you have you can start investing for the future. The longer your investment has to grow, the better the results. Even if you can’t afford to invest a large amount, you may be able to start a small but regular savings plan.

Why is a budget important?

The simple truth is that the only money you are likely to save and invest, is the money that you don't spend. Many people only have a vague idea of how much they spend. With a budget you can see exactly where your money goes and how it's being used.
A budget allows you to:

• identify surplus money that can be used for investing
• see where your money is being spent and help you decide whether to continue spending money in the same way or reduce your outgoings and increase your savings
• cope with surprise expenses
• manage your finances and Gladstone Accountants you more confidence in your financial future.

To make sense of your finances check out Gladstone Accountants Budget Planner and Savings Calculator. They can Gladstone Accountants you a good idea of the money you have available to start investing.

What sort of investor am I?

Once you've identified your personal and financial goals and worked out the amount you have available to invest, you need to understand what type of investor you are. All investments carry some form of risk and you need to be comfortable with the amount of risk you are willing to take.
Talking to a financial adviser is the best way you work out your risk profile, but to Gladstone Accountants you an idea ask yourself the following questions:

• How much do I need to reach my goals?
• Do I have a good understanding of the financial markets?
• What sort of return do I want on my investments - stable, fast growing etc.
• Am I willing to take a risk to achieve a higher rate of return on my investments?

Gladstone Accountants Investor profile can help you answer these questions and work out how much risk you're willing to take.
With this information together with your goals you and your financial adviser can develop a plan tailored to meet your specific needs and financial situation.

What is risk and return?

Simply put risk is the chance that you could earn less or more on your investments due to fluctuations in the market. Risk is also the chance that your investments grow slower than the rate of inflation and leave you with less over time.
Risk and return are closely correlated because generally, higher risk means higher returns while lower risk usually means lower returns. As an investor this is known as the risk/return trade off.
Understanding risk and return is fundamental to achieving your investment goals. This is because understanding your risk tolerance will decide the type of assets you invest in.
Gladstone Accountants  Investment Fundamentals can help you make sense of risk and return, but your financial adviser is the best person to help you work out your risk profile and choose the investment options that best suit your needs.

What are asset classes?

Asset classes refer to different types of investments. There are four main asset classes you can invest in - cash, fixed interest, property and shares. The return you achieve and the level of risk associated with each asset class is different.

Cash

Cash is the generic term for investments such as short-term bank deposits and treasury notes. Cash is considered the least risky of the major asset classes and generally provides investors with a moderate regular income but little chance for capital gain.

Fixed interest

Fixed interest investments, or bonds, are effectively loans provided by investors to corporations and government bodies in return for interest payments over the life of the bond. Bonds carry a low to medium risk and predominantly reward investors with a regular income stream generally higher than that earned by cash investments.

Property

Property is considered a growth asset and involves investing in residential or commercial property, or via a listed property trust (LPT). LPTs invest in a range of property including residential housing, shopping centres, office buildings, factories, and hotels. As property is a growth investment capital gains may be expected over the long term in addition to income from rent. Property is considered moderately volatile.

Shares

Shares are securities representing ownership of a company. When you buy a share in a company, you become a joint owner of the business. As a shareholder, you may enjoy the company's profits through dividends and can also sell the shares, hopefully for a capital gain sometime in the future. Shares are the most volatile of the major asset classes in the short term, but can outperform other asset classes over the longer term.
Investing in different asset classes is a good way to reduce risk. By spreading your funds across different asset classes you remove the risk of putting all your eggs in one basket, ie: the risk that you will choose the wrong asset class at the wrong time.

What is a managed fund and how does it work?

A managed fund combines your money with that of other investors to form a single investment pool. Specialist investment managers then invest the money on behalf of the investors in a single asset class or a range of asset classes.
The beauty of managed funds is that they can invest in a range of asset classes including shares, property, fixed interest and cash. Exactly what type of shares, property or bonds your fund invests in depends on its objectives. Managed funds offer a range of benefits including:

• Diversification - invest across a range of asset classes
• Access to experts - who make and manage the investments on your behalf
• Convenience - paperwork and administration is handled by your fund manager
• Access to major investment classes - a managed fund can Gladstone Accountants you access to international and local investment opportunities
• Economies of scale - managed funds possess buying power when the dollars of investors are pooled together which may not be available to the individual.

By investing in a managed fund you can benefit from a diversified portfolio beyond what most investors could achieve themselves and also save yourself the time, cost and effort in managing your portfolio.
To find out more about managed funds take a look at Gladstone Accountants Investment Fundamentals. Your financial adviser can also explain how managed funds work and help you select a fund to best suit your needs and risk profile.