Five tips for your first meeting with a financial adviser
Every great journey starts with a first step - and your financial advice journey begins with an initial meeting with your adviser. Here's how to make sure the meeting is a successful one.
Here are three ways to invest your hard-earned money:
1. Invest regularly in managed funds
Paying off a mortgage teaches you the healthy financial habit of investing a set amount each month. So, now the house is paid off, why not keep up that discipline with a regular investment into a managed fund?
Managed funds can help you gain exposure to a diverse range of assets, even for a relatively small investment. You’ll also get the benefit of the expertise of the fund manager who selects and manages the investments — so there’s no need to research and choose stocks yourself.
By regularly investing the same amount of money over time, you’ll be employing a strategy known as ’dollar cost averaging’. Because you automatically buy more units in the fund when prices are low, and fewer when they’re high, your average cost per unit is reduced, increasing your potential for profit.
It’s like buying $100 worth of apples every week — you get more when they’re cheap, so you end up with more cheap apples than expensive ones. Then, if apples go up in price, you’re investment should be worth more than you paid for it. However, the cost of apples will go up and down.
2. Salary sacrifice into super
Another good place to invest some of your income into your super, through a salary sacrifice arrangement.
It’s easy to do — simply arrange for your employer (if this option is available) to pay part of your pre-tax salary into your super, along with the compulsory superannuation guarantee super payments they already make.
Salary sacrifice may also be a very tax-effective strategy. That’s because it comes out of your pre-tax earnings, which means it may lower your assessable income. As a result, you could pay less income tax each year, while building your retirement savings.
What’s more, the money you salary sacrifice to your fund is taxed at just 15% within super, which could be less than your marginal tax rate.
3. Diversify into other types of investment
Many Australians like to put money into investment properties. And there’s no question that this could be a great investment, with potential capital growth and rental income. But don’t forget the importance of diversification, spreading your investments across a range of assets, markets and industries — including overseas.
For example, international shares can give you exposure to rapidly growing emerging markets, such as China, Russia and India. You can also enjoy access to the developed markets, and some of the world’s most successful companies.
You may also want to consider investing in fixed interest assets, like term deposits or bonds, for more predictable returns.
Or if you are keen to stay in property, indirect investment property is another option. By pooling your money with other investors into a property fund, you can gain exposure to commercial or overseas property, at a lower cost than investing directly.
If that all sounds too hard, there are plenty of managed funds to choose from, that can provide instant diversification — without having to do the legwork yourself.
Making your money work for you
Investing can be complex, and everyone’s financial situation is different. So it’s important to get the right financial advice. A financial adviser can work with you to determine the most tax-effective investment to make the most of your surplus cash. Find one here.