I had a conversation with someone today, and something popped up that I hear quite often.  A lot of people, most people, like the idea of investing.  It’s satisfying to know that you’re doing something about your future, to know that you’re taking control of things and that over time, you should start to see a few more zero’s on your balance sheet (that’s zeros with a number in front, rather than just zeros!).

However, a lot of people don’t actually know where to start.  It’s a bit like starting to train for a marathon – how do you get started?  The only difference is that a marathon is running, so if you want to get good at running, you start running.  However, do just start running longer distances, do you do interval training as well?  Will weights helps?  What about nutrition?  The more you think about it, the more ideas come to your head.

Investing is the same – it seems so simple.  “Oh, I have a little bit of money here, I think I’ll invest it”.  Yes, very simple – but then wait…  “ah, well, I could invest it over here.  However, what about over there?  What about tax?  Is this really the right thing to be doing?  Am I ready to make that commitment?”.  It’s seriously confusing, especially if you don’t have any experience.  Well, if you had experience, you wouldn’t be investing for the first time now would you!  However, it’s still relevant to those that have invested before because what if you want to try something new?  How do you do that?

So, here are MoneyDad’s TOP TIPS FOR STARTING INVESTING!  I know, I know – you’re all seriously excited that I’ve finally done a top tips section!

For those that don’t have any money

If you don’t have any money, the best thing you can do is go get some money.  Usually, the best place to start is a budget (arghh, I know what you mean, however I’ll write another blog on budgeting, it’s actually really interesting if done properly.  And I’ve met very few professionals who know how to do it properly).  Find just that little bit of spare change in your day to day, cut where you can and eventually, you’ll find $500 per month or something like that.  It’s only $6,000 per year, but add that up over time and guess what, you’re going to be seeing some serious money pile up.  Where you put it?  Into something simple, low cost and easy to manage – so probably something like a managed fund.  But be careful – 75% of fund managers can’t even keep up with a monkey throwing darts at a stocklist to pick a winner, so do your research.

For those that have a little bit of money

Yay!  You’ve got a little bit – but the main question to ask, which will annoy the c**p out of you is “how much more can you get?”  It’s not because it’s not enough, it’s about context and cash flow.  If it’s a lump sum of money from something like an inheritance, then we would treat it differently to if you had been saving hard and putting away $4,000 every month.  Typically, shares or a deposit on an investment property would be the type of thing you would think about.  I haven’t talked about putting a deposit on a property to live in because we’re only talking about investing, however it’s an option for those that it’s important to.  The decision to buy property or shares is again a whole new blog post, so check in later when I’ll attack that one.

For those that are home owners

It’s pretty typical that a home owner is going to want to pay their home off, and it’s a good thing too.  It’s likely that you’ll pay the debt back twice with the interest that you pay, so the sooner you pay it off the better.  It’s a common thing, however, that people will think that diverting funds away from the home loan into an investment is a good way to start.  Almost correct.  It’s great to build up additional assets and diversify, however you want to do it properly.  Make sure your mortgage is set up correctly.  Again, depending on your equity and cash flow, you can consider shares or property – however risk mitigation is paramount.  You need to have 10 years plus for either option so be careful there.  You also have to have a solid idea as to your plans – do you want to upgrade or renovate?  Move to a different area?  That will make a significant difference to your plans.

What about super?

Superannuation is awesome, but you have to do it right, and use it at the right time.  It’s important that you’re aware of all your options so that you can understand it in context.  Just a little extra pre-tax dollars into super over a long time can make a huge difference, however don’t do it at the expense of paying your home off sooner or building that investment portfolio.  Make sure you pick the right super fund because that will make a massive difference as well.  You can buy the same assets inside and outside of super, so it makes sense to buy the same shares and property with pre-tax dollars.

This is only tip of the iceberg stuff – it’s the proverbial rabbit hole.  Over the next few weeks, I’ll be going through a few ideas on super, mortgage structures and the like.  Nothing is going to replace proper, customised strategic financial advice and I highly recommend that you reach out to someone that you trust who is an expert in this field.  And that (finding someone) is a whole other blog post that you should wait for.