Most New Zealanders want to be better with money, but many of us are unsure where to start.
“The new year is a great time to take stock of your financial situation and establish some long-term investing habits,” says Kiwi Wealth general manager customer, product and innovation, Joe Bishop.
“To help Kiwis realise their New Year resolutions, Kiwi Wealth has issued advice for the people looking to make the most out of their money in 2020.”
Know your goals
The first thing to do is to know yourself.
What are your short-term, mid-term, and long-term goals? What do you want to achieve, and over what sort of timeframe? Asking yourself these questions and jotting down a few financial goals is the first step towards making the most of your money.
Don’t put all your eggs in one basket
Spreading your money over several different investments – known as diversifying – can potentially reduce the risk of losing money.
Spread your money and your risk by having an investment portfolio that has a mix of companies, countries, trends and asset classes. That way you should be in a good position to ride out the highs and lows of the share market.
Don’t be ruled by the fear of loss
“A bird in the hand is worth two in the bush” is an old saying that perfectly sums up our very human fear of loss. In fact, the theory of loss aversion shows that we’d much rather not lose $10 than gain $10.
This fear of losing out can really work against us when investing. We might feel more comfortable spending rather than saving or be tempted to hold onto losing stocks for longer than we should.
Don’t miss out on free money
Since the introduction of KiwiSaver, investing has become more mainstream. Yet thousands of Kiwis are missing out on over $500 of free money every year by failing to take advantage of the government’s annual contribution to our KiwiSaver accounts.
One of the easiest and largest returns Kiwi investors can receive is the $521.43 KiwiSavers automatically receive from the government if they have contributed $1,042.86 into their KiwiSaver account by the 30th of June each year. That’s a 50% return on the initial investment every single year.
If invested well, that money will snowball and help you attain your long-term financial goals
Try to understand stocks and bonds
One of the big hurdles for would-be investors is lack of financial knowledge.
If discussions about stocks and bonds sound completely alien to you, take the time to learn about them. It’s never too late. Understanding the difference will help you appreciate why we recommend diversifying your investments with a combination of both.
Panic is a natural reaction to bad news.
And if you monitor the share market every single day, there is bound to eventually be a time where you see something to panic about. But don’t fret.
Once the initial panic is over, remind yourself that you are in for the long-term. Markets going up and down might look a little scary, but as a savvy investor you’re interested in the long-term trend.
Be true to yourself
Choosing to invest is a deeply personal decision, and it goes hand-in-hand with our own morals and ethics. It’s important to be true to yourself and your own values when making investment decisions.
Good fund providers should have a responsible investment policy which details the types of products and services that they will not invest in.
Make a plan
The sooner you start planning for your long-term goals, the better.
A financial adviser can help you develop a plan that’s right for you, or you might like to take advantage of Kiwi Wealth’s Future You® online tool to create your own customised plan.
Don’t set and forget
Kiwis have traditionally locked away their money in term deposits and hoped for a decent return.
But with interest rates at historic lows, investors are now looking to other ways to maximise their investments. One of their options is managed funds, such as the type provided by Kiwi Wealth. The range of funds have different risk profiles, objectives and projected returns so investors have options available to best suit their investment needs.
Cut through the buzzwords
The finance industry is full of jargon, but you shouldn’t give up power over your money just because many experts refuse to speak in language that’s easy to understand.
There are numerous online resources out there that cut through financial jargon and make investing easier to understand. Kiwi Wealth’s jargon-free Investing Basics hub available online can help you worry less about money and get closer to achieving your goals in life.