Then you can attend ASX classes and seminars to build up your knowledge bank on investing. Why not try and create a dummy portfolio online and get use to the performance of shares. In the beginning obtaining sound advice from stockbrokers or a financial planner is critical and it will speed up your learning process. Generally, sShares should also be held for a minimum of 5 to 7 years—this is when your portfolio will start to mature and solid returns will start to show. I prefer never to sell a good quality share with a growing dividend year after year.

If a sharemarket is falling why then are quality shares also falling in price?
This is because index fund managers—day traders, fund managers speculators and hedge funds—are all selling their portfolio because either they have to in-line with a falling market, or they believe the market may fall even further and they are attempting to profit on a further downside in the market. They need to sell the good shares as well as the under performing ones which they hold in their portfolios. So therefore the quality shares like banks will fall in price as well. What a great time to buy!

This may be difficult as you may intend to place your child in preschool and this means your investment is only working for five years from the birth of your child. Of course an investment compounding for 10 years or more is going to yield a better result.

As a parent, it is your duty to make financial education a regular dinner conversation in your home. You need to practice it and your children need to learn how to budget and save.

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Now that you have a better understanding of what to invest in and where to go to start, get smart and start today. We are all responsible for our wellbeing and future prosperity. The good news is it’s never too late to start so get going.
Perceptions of an investor—your questions answered
Many people have questions about various types of asset classes and following is an attempt to answer the more common questions I receive.

Can I lose on cash? I thought it was the safest asset.
Cash needs to be invested in order for it to grow. Just leaving your funds in cash will not produce growth in your overall wealth. It needs to be invested or otherwise inflation will eat away at your wealth. Yes, in this sense, you certainly can lose by investing in cash.

Isn’t fixed interest a low risk strategy?
There have been many examples of investors losing money on their fixed interest investments—one example is debentures. Some debentures are backed by second mortgages and when a property markets turns sour or slows down, some property developers are unable to sell their properties and therefore cannot pay back the loan. If you buy a bond for more than its par value (its original issue price) and that bond falls in value, you will lose on that investment if you need to sell it before its maturity.

What advantages does property provide?
Good property is a sound investment if it’s your home. After all, the purchase of your home is also a lifestyle decision. There are tax advantages in owning your own home upon sale , but the home loan is a non-deductible debt. There are no tax advantages with having this type of debt. It’s bad debt.

Aren’t shares risky and volatile?
If your portfolio consists of one or two individual shares then yes, your portfolio is a very high risk one and it will also be volatile. Owning direct shares is not for everyone. Managed funds are a far better alternative and by starting with a managed fund you can learn what your fund manager is investing in for you

On Managed funds

Managed funds
A managed fund, also known as a unit trust, is simply where you pool your money with other investors into a single fund. The fund has a fund manager who will invest on your behalf. The fund manager is then able to spread their accumulated buying power across a number of different investments.

A fund manager accepts the worry over the investment—that’s what they are paid for. When the share market falls heavily they can be more level-headed than you are in how to handle a share market melt down. There are many other advantages of using a fund manager. They may be able to buy certain shares or be able to participate in an IPO (an initial public offering, commonly known as a share float) that you could not do as an individual investor.

A major advantage of a managed fund is that if you only have a small amount of money to start investing you can still buy shares through a managed fund and keep adding to it as part of your savings plan on a regular basis. Investing in a $500 block in a share parcel doesn’t offer strong returns, however by using a fund manager and investing $500 per month in that fund you will not only increase your share holding, you will also benefit from dollar cost averaging. Dollar cost averaging is investing a fixed dollar amount on a regular basis, in order to smooth out the volatility in the marketplace.

Managed funds do attract fees known as management expense ratios (MER) and some managed funds may also charge entry and exit fees. Like any investment, there is also no guarantee that a fund will make you money and always remember that past performance of a managed fund is no indication of its future performance.
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Managed funds do attract both direct fees (charged directly against the account) and indirect fees (not charged against the account but against the gross investment return) and may also charge entry and exit fees and fees for certain transactions. Like any investment, there is also no guarantee that a fund will make you money and always remember that post performance is no indication of future performance.
Compounding
Now here comes the power of being an investor and not a trader—the power of compounding.

The key thing in investing is that you must reinvest your returns. The income your investment produces needs to keep working for you for as long as possible before you need to take the cash out.

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