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Yesterday was ‘Little Year’ in the Chinese calendar. Falling a week before the start of the New Year, the day is traditionally one of memorial and prayer, but it’s also a day to clean out your house and ‘sweep away’ bad luck.
While you’re cleaning house, don’t forget to tidy up your finances because, according to Chinese astrology, the coming ‘Year of the Pig’ could be a prosperous one.
But when it comes to choosing an investment, where to start? Like that drawer in the kitchen – so full of all sorts of things that it will barely close – picking a fund from the 3,000 plus available can seem such a daunting task that it’s better not to even start.
So this week we’re taking the time to go back to the beginning and explain how to choose a fund.
‘You have to do the research. If you don’t know about something, then you ask the right people who do.’ – Spike Lee, Director
What do you eventually want to use the money for? For example, are you saving to buy a home, take a year off to travel or planning for retirement? Start compiling a mental (or even physical)| vision board for your investments to motivate you to keep saving.
So now you have your vision board full of tropical holidays, early retirement and a big ‘ole house in the country – ask yourself what’s your time frame? Are you investing for something that’s 20 years in the future or will you need the money in the next few years?
Now that you’ve determined your why and when, it’s important to think about how much risk you’re willing to take with your money. Generally, the longer your time frame, the more risk you can afford to take, as you have time to recover from some periods of loss and hopefully still come out ahead. However, if it’s causing you to lose sleep – it’s not worth it.
It’s a good idea to decide at the outset how much risk you want to take so you don’t find yourself in over your head down the track. Risk is very personal and what one investor considers ‘high risk’ may be ‘medium risk’ to another. A good question to ask yourself is ‘how much can I afford to lose in the short-term?’
Time to start thinking about where and with whom you want to invest.
The research provided on FundCalibre can be a good starting point, and less overwhelming than staring down a list of 3,000 possible funds.
But if you still find yourself lost in a see of funds and jargon, follow Spike Lee’s advice and get additional help by reaching out to a financial adviser. It’s better to be over prepared than under when choosing an investment fund: getting it right (or wrong) can have a huge impact on your money.