Should you start investing?

Cash in the bank can be risky.

Cash in your savings account might be losing money. Turn back the clock by a decade and any high-interest bank accounts could earn you around 6% in interest – today we’re lucky to get 1%. On top of this, every year you’ll find the price of things increasing and every dollar you earn is buying less. This effect (inflation) is measurable and something everyone should be aware of.

With inflation at 1.5% and your average savings account returning 0.5% at best, every dollar sitting in the bank could be losing its value at around 1% per year. This low-interest environment is seeing more and more people choosing to chase better returns.

This isn’t to say money in your savings account is a bad thing (you should always have a comfortable buffer), however, it could be worth considering that the next surplus dollar you have might be worth a little less every day it sits in your bank.

Why starting early is always better.

Talking to people under 35, you’ll find an increasing number have dabbled in some form of investing. Whether this is starting a direct share portfolio or buying an investment property, the common theme is more and more people are realising the benefits of starting early.

There’s a popular formula in the finance world known as the Rule of 72. It tells us the number of years it takes to double any amount of money, given a rate of return. As an example, a consistent rate of return of 7% will double your money roughly every 10 years.

Over the course of your working life, something like this makes an enormous difference. If I had to give myself some investment advice at 18, starting early would be near the top of the list. To put this into perspective, it could mean the difference between buying your first home or reaching retirement 10 years early.

Have you thought about paying your debts?

One of the biggest downsides to investing is volatility in the markets. For the more risk-averse, or those that simply can’t afford to see their investment fluctuate, the idea of your money taking a plunge might be what’s steering you away. This brings us to the third issue – why invest when you can pay down debt and bypass most of the risk?

Change your investment mindset to consider any debt you currently have. If you’re chasing an investment return of say 6%, why not pay down (for example) the personal car loan that’s costing you 6% in interest? The outcome is essentially the same but taking the debt repayment route means you’re not exposing yourself to any unnecessary risks.

Of course, the downside is you’ll be missing out on the capital growth and the benefits of compounding returns but it’s the trade-off for knowing your money is working hard without having to worry.

Take the Next Step

Navigating the world of investing and money management can be daunting and we find that the largest barrier to this comes down to knowledge. While there’s plenty of resources online to educate yourself and begin building wealth, it’s always worth consulting a professional.

The team at MBA Wealth Management can help you piece your investment into a larger financial plan and get you started in reaching your financial goals. If you’d like to review your situation and see how to make the most of your money, fill in the form below and our team can contact you to arrange a complimentary consultation.

Any advice provided here is general in nature only as, in preparing it we did not take account of your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs and objectives. You should consider the relevant Product Disclosure Statement before making any decision relating to a financial product.