Here are 10 basic investment principles for those aged 30 and under.

##Time Time is your second greatest asset, after the ability to generate income. Time drives the compound effect, in which returns on your assets are added to your lump sum. So $1,000 that’s earning 5% per annum doubles in 14 years thanks to compounding. If you’re a 25 year-old, you have another 70 years or so of living and letting compound interest work its magic.

Investment

Don’t confuse investment with saving. Investment is developing an appreciating asset in the long term so it eventually generates income. Saving is accumulating cash for short-term goals such as house deposit, holiday, car and university fees.

Risk return

Investing is a trade-off between risk and return, so to get high returns you take more risk (of the value going up and down) in assets such as shares. To ensure your returns, you have to stay invested for the long term.

Risk profile

The most important aspect of your profile is age. In your age group you have many decades to weather the ups and downs of share markets, so you enjoy the gains. Your greatest risk is probably inflation, which reduces the spending power of your cash by around 2.5% each year.

Superannuation

Super is not an asset class — it’s a tax friendly investment vehicle that will deliver an income for you in your post-working years. Make sure you’re invested in super fund options that give you the best chance of building a large nest egg.
Property
If you can’t buy where you want to live, buy an affordable investment property and ensure it yields capital growth and income. There are tax planning factors in property so model the investment with an accountant.

Goals

Always create your own goals. It makes it easier to find the products, solutions and strategies relevant to you.

Advice

You don’t necessarily need full financial planning to gain expert insight. Some advisers will deal with you on an hourly basis and your super fund fees might include advice — use it!

Help

You don’t have to know everything. Try online apps such as Acorns and Self Wealth, which have smart options, at low cost without too much detail.
To invest in shares without expertise, you can “buy” the market: managers have funds that track stock exchange indices and you can buy exchange traded funds (ETFs) that track indices of major stocks, such as the S&P ASX200.

Diversify

Don’t place all your wealth in one asset, one asset class or one industry. Don’t overweigh yourself with, for instance, property or mining shares — concentrated portfolios can fall faster and take longer to recover.
Finally, never take your eyes off inflation — the quiet destroyer. You can overcome the “risk” of shares going up and down by using time. But if you become too conservative and put all your money in cash, time allows inflation to win. ❐


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