Investing – if you don’t do it, inflation could destroy what you currently have. If you DO do it however, be aware of the tendency for many investors to “Hunt Yield”. In many cases, investors who chase yield, get risk, but not the compensation that should come with it.
Investing in assets which grow in price over time, hopefully above the rate of inflation and after fees, is the antidote for evils of inflation.
Investing involves risk though – risk that what you invest could go down in price and risk that you may not be able to get your money out in a hurry. If you’ve decided to invest to grow your base of wealth – here’s three things to keep in mind, or three golden rules:
– INVEST REGULARLY. This is so important: timing the market where you buy low and sell high is great perhaps for some, but for most of us, we cant get the timing right. Dollar cost averaging is the best way to consistently scale in over time to get the exposure you want, without getting the timing piece perfect.
– GET ASSET ALLOCATION RIGHT. A good portfolio will have the following ingredients, cash, fixed interest, property and shares. The mix or blend of these different asset classes is crucial to strike the right balance between liquidity (that’s the ability to convert your investment into cash quickly), risk (which is the possibility the price of your investment could drop) and returns (which is your compensation for risk and liquidity)
– START WITH THE END IN MIND. Most investors, especially when starting out, view the whole investing thing as a game – a game they want to win, but there’s so much more to it. What is it that you’re trying to achieve? Have you factored in how much you need to live the life you’re aiming for in retirement? What about your kids, what about your family, what are you doing with your home in retirement plus how long do you think you’re going to live for– these are all things that can help set the appropriate amount you need to set aside from today, for tomorrow to be taken care of
The Hunt for Yield is our topic. In an environment where interest rates are super low, and there’s a significant disconnect between Main St and Wall St., how can investors still do well, without losing everything? Hope you enjoy today’s episode!
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