Going for Growth
Written by R., A. Stewart
Are growth funds appropriate for you?
The only person who can answer that question is you and only you because it is your personal circumstances and your goals which are the factors which determine where to invest your money. Your age, health, and commitments are factors which need to be considered.
Time is the one factor which covers all of the others. How long are you going to be investing this money for?
There are three categories:
Short-term money. (1 year or less)
Medium-term money. (1-5 years)
Long-term money. 5+ years
If you are saving for something and will not need the money for more than 5 years, this is considered long-term and suitable for investing in growth funds. Just understand that the volatility of the markets will mean that your savings, whether it be for a house deposit or retirement will go up and down. That is the nature of the markets.
Saving for a car, an overseas holiday, or house improvements are goals which are normally achieved within five years. These savings are suitable for balanced funds which are a mixture of growth and conservative funds. Your savings will still bounce up and down but not as much as growth funds.
These days it is easy to save by drip-feeding money into the markets with online platforms such as sharesies in New Zealand and Australia, Angelone in India, and Robinhood in the US. If you are not from these countries then it is a good idea to do a google search for one which you can find in your country.
It is important to diversify your portfolio and have a goal for your savings even if it is just to build a portfolio on a shoe-string. Don’t just leave your nephew’s inheritance in a bank account that is easily accessible. Invest it in a fixed term account which cannot be easily accessed.
Don’t invest all of your life savings in an online investing platform, even if you spread your money around several companies. You do not know what misfortune will hit that particular platform.
If you are saving for a house deposit then it is a good idea to invest the money in a fixed term account until you need the money. It helps develop a good reputation as being responsible with your money.
There are added risks with online banking and investing. The main one being scammers. If your email account was hacked then how safe would your money be? Having your money spread around in different places is better. Many sites ask you to sign up using a google account. You should never use the same google account you use for your banking when doing this. Always set rules which you never break and when you read of someone who has been the victim of a banking/email scam then learn the lesson which you can apply to your own life.
In this day and age of tapping as your payment goes there are dangers involved in this with the main one being that you will lose your card. If that happens then someone may pick it up and use it. Having too much money in the account which you use for this purpose is just asking for trouble. It is better to keep larger sums of money on another card which you do not carry around everywhere. Imagine if you had over a grand on the debit card which you lost.
If you have no plans for your money then put it to work, don’t just leave it in an account paying little or no interest. Learn to be an investor and learn to handle the volatility of the markets. There are three sure ways to lose on the share market during the lows.
- Change from growth funds to conservative funds
- Sell your shares.
- Stop contributing to your retirement fund.
The number 1 person will find that the share prices have risen and they have missed out on the rises which would have recouped their losses.
The number 2 person will have sold their shares at a lower price than they would have received if they had waited until the markets recovered.
The number 3 person would have missed out on purchasing shares at a lower price and when the markets recovered they would have seen the value of their shares increase by a fair bit.
About this article
The contents of this article are of the opinion of the writer and may not be applicable to your personal circumstances, therefore discretion is advised. You may use this article as content for your blog/website or ebook. Read my other articles on www.robertastewart.com
