Welcome to the exciting world of investing! Whether you’re saving for a house deposit, a dream holiday, or a comfortable retirement, investing can be a powerful tool to grow your wealth over time. This guide provides a clear roadmap for first-time investors in Australia, exploring the basics and setting you on the path to financial success.
“Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.” – Andrew Carnegie (American industrialist and philanthropist)
Why Invest? The Power of Compound Interest The magic of investing lies in compound interest or “interest on interest”, where Albert Einstein famously called it “the eighth wonder of the world”. Let’s take a look at why that is:
The magic of investing lies in compound interest or “interest on interest”, where Albert Einstein famously called it “the eighth wonder of the world”. Let’s take a look at why that is:
When you invest you money, it earns a return. This return is then reinvested, and future returns are calculated on the growing total amount. Overtime, this snowball effect can significantly increase your wealth. Here’s an example below.
Up until December 2022, the ASIC (Australian Securities & Investments Commission) has reported that Australian shares have delivered an average annual return of around 9.4%, which includes dividends. This would mean that a $10,000 investment would have grown to around $40,440 with the help of compound interest.
What are your investment goals?
Before diving in, it’s crucial to define your investment goals. Are you saving for a short-term goal (a car), a mid-term goal (deposit on a house), or a long-term goal (planning for the distant future)?
Once you have an understanding on your goals and potential risks, it’s time to put that work into actions. Here are some steps to get you started:
- Do your research: Learn about different investment options and their pros and cons. Have a look at ASIC’s “Money smart” website for more information (https://moneysmart.gov.au/)
- Open an investment account: There are many banks and online brokers who offer investment accounts. Consider and compare fees, features and minimum investment requirements.
- Start small and invest regularly: Consistency is key. Investing small amounts on a regular basis can grow significantly over time.
- Seek professional advice: If you’re unsure about your investment choices, consider consulting a financial advisor.
Different Investment Horizons, Different Strategies
Your investment timeline influences your risk tolerance. Generally, short-term goals require lower-risk investments like cash or term deposits, offering guaranteed returns but potentially lower growth. Long-term goals can benefit from higher-risk options like shares or managed funds, which offer the potential for higher returns but also greater volatility.
Getting Started with Investing in Australia
Did you know that around 20% of Australians invest in property according to the latest ATO data (2020-21)? While property can be a lucrative investment, it requires significant capital and ongoing management.
House and Land Packages: A Strategic Entry Point
For many first-time investors, a house and land package can be a compelling alternative. Here’s why:
- Get into growth areas early: House and land packages are often available in developing areas with high potential for future growth. This allows you to benefit from potential capital appreciation as the area matures.
- Reduced upfront costs: Compared to established properties, house and land packages often require a lower initial investment. This can free up capital for other investments or help you get started sooner.
- Brand new property: A new house eliminates maintenance worries for several years, allowing you to focus on building equity.
The Final Word: Investing is a Journey
Investing is a marathon, not a sprint. There will be ups and downs along the way. Stay informed, remain disciplined, and don’t be afraid to adjust your strategy as your goals and circumstances evolve. With knowledge, patience, and a long-term perspective, you can unlock the power of investing and build a secure financial future.
At InvestPlus, we provide diverse house and land packages throughout Australia, strategically positioned in locations recognised for their Strong growth prospects. By collaborating with trusted developers and builders, we ensure the quality and value of your investment. For further information on securing your real estate investment, please contact us using the details provided below.