Investing basics

Source: Money Smart by ASIC, the financial regulator

Steps to smarter investing

Successful investment has very little to do with good luck. There are tried and tested principles you can follow which can vastly improve your ability to achieve your goals and avoid disaster.

A smart investor takes time to understand the basic principles of investing, then develops, and sticks to, a sound investment plan.

Think ahead

The first stage on your journey to investing wisely involves doing some advance thinking:

• Know your goals and risk tolerance – your goals, timing and your appetite for risk will determine your choice of investment
• Understand risk and return – risk is the chance an investment won’t give you the outcomes you hope for

Choose your investments

Once you’ve identified your goals and risk tolerance:

• Develop an investing plan – create a realistic plan that meets your needs and spreads your assets
• Choose your investments – choose investments that fit your plan
• Avoid disasters by scanning investment warnings – be wary of claims made in seminars or about sports betting and trading software or ‘get rich quick’ offers

Manage and monitor

Finally, keep your investment strategy on the rails:

• Keep track of your investments – keep an eye on your investments rather than adopting a ‘set and forget’ approach
• Problems with your investments – what to do if your investments have fallen in value or the investment company has become insolvent

There are no short-cuts to becoming a successful investor. You’ll need to understand the basic principles. Start by identifying your own needs and attitude to risk.