Make your money go to work

Over the last 12 months we’ve seen house prices across Sydney soften and a roller coaster ride on the share market sparked whispers of GFC round 2. What does this mean for the budding investor? Should we panic? Should we be ripping our cash from the ATMS and stuffing it into our mattresses or plugging it into time shares on the Gold Coast?

The truth is there is no steadfast answer and when considering which investment strategy is right for you (we at Fox and Hare don’t personally advocate for either of the strategies listed above) but there are 4 questions that can help point you in the right direction.

1. What are you investing for?

It’s really important to align your investment strategy to a particular goal. These goals range from the mild like buying a home, paying for private education for the kids and travelling the world to the unadulterated and wild. This variety is truly the spice of life and I don’t think the people of Sydney will ever stop surprising me with the things they spend their money on. What they all have in common though is a goal. Something that they’re working towards and once achieved/purchased/paid for will signal their success.

“Those that have goals succeed because they know where they are going”

2. How do you feel about risk?

Let’s begin by establishing that ALL investment strategies come with a degree of risk. Investment properties can be damaged or destroyed (recently the roof collapsed on my home in Redfern!), the stock market can crash and interest rates can fluctuate. It’s not all doom and gloom though! There are a number of ways to minimise risk and depending on whether you’re into white knuckle investment rides or something a little less taxing there are options out there for you.

My personal risk management favourite is diversification. In English ‘don’t put all your eggs in one basket!’ If you spend every last dollar on property and the market collapses, it’s high seas ahead. If you purchase a cheaper property and use the remaining cash to break into the stock market you’ve spread your risk a little thinner. Time is also of the essence and the length of time you’re exposed to an investment strategy can have implications on its output.

Nobody likes a one trick pony!

3. What are the costs associated with investing?

There are usually unexpected and almost always unwelcome costs (who knew that a roof could be so expensive?!) when investing, and while Murphy’s law is unpredictable the ATO most certainly is not. It’s absolutely necessary that you accept you’re not only coughing for the initial investment but will be facing off with tenants, unruly stock markets, changing laws and the taxman as well. It’s imperative that we know and accept the TRUE cost of our investments over their entire lifespan.

4. Are we in it for the long run?

Let’s face it, your money is not the only thing you’re investing. You’ve worked hard for that cash and parting with it is going to be hard. Investing can be incredibly emotional so it’s important to remain disciplined. Property is a standout example here, people are much more likely to fall in love with a property they want to live in themselves. Of course, you should love where you live but the flip side of the coin says your investments should be working relationships. Investment is all about the numbers!

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