Investing for the first time. Where to start?

SkMed on 21/10/2016 - 08:14

Hey all.

Over the past year I have managed to save a good chunk of change.

I feel like it would be wise to invest about 20k in something, somewhere. Im great at all financial aspects except I have never invested in anything before as I have always thought of it as a bit of a gamble (which I dont do).

Im 29, renting in the Melbourne inner suburbs and come to terms with the fact that I will be renting forever so putting it towards a house isnt on the cards.

Does anyone have any suggestions on how to get started in some low risk investing? I dont even fully understand the whole share concept so some starter info on that might help if anyone knows a good resource (investing for dummies or something).

My dad suggested signing up for NABtrade and investing in commsec which would be safe. So I signed up and the interface scares the crap out of me, also whats a commsec? Haha.

I also got 3 free months of brokerage by signing up (and have no idea what that means).

When investing do you need to be watching the markets and whatnot all the time? Im super time poor and honestly not interested in doing that, so would ideally just have my money somewhere slowly gaining interst rather than having to get into all that.

Any help would be appreciated,

Thanks from soemone who knows nothing about shares/investing.

Financial

Comments

  • ESEMCE on 21/10/2016 - 08:34
    +2

    For the money saved, something like shares in a Managed Fund is probably what you're after.

    Looking forward and assuming you're not planning to use your investment until retirement, start Salary Sacrificing into your Super.
    You get a nice tax benefit (especially if you're in the top bracket), and there's nothing complicated about it.

    • SkMed on 21/10/2016 - 09:11

      Thanks for the suggestions. I work freelance so not sure how I would go about Salary Sacrificing into my Super but I will look into it.

      A Managed Fund means paying someone else to invest for me yeah?

      • ESEMCE on 21/10/2016 - 09:13

        Yeah, basically.
        You buy shares in a company that doesn't actually do anything but buy and sell other companies shares.

        As always with money matters, you should really seek out a Financial Planner.. Especially considering your line of work.

  • inherentchoice on 21/10/2016 - 08:44
    +1

    Pay off any debts first.

    • SkMed on 21/10/2016 - 09:10
      +4

      I've never had any! :)

  • garetz on 21/10/2016 - 09:10
    +3

    Be prepared to lose 100% of your investment, if you cannot afford to lose it, then dont invest in shares. Even leaving it in a bank accruing interest is not a sure thing, but it is guaranteed by the government up to 250k. Anything you want to invest in is a learning process, so as you learn you can lose it all very easily.

    If you are time poor, then you will want to invest in medium to long term shares, which are usually the safest being bluechip shares, however they give you moderate returns. You have to evaluate risk vs returns.

    The best way to start is invest in shares of companies you have knowledge in, the very first shares i invested in was the first company i worked at, and it went up 5 fold in 3 years. Not everyone is lucky though, but the more time you spend learning and researching what to invest in, the more chance you will make a good investment.

    Investing in shares is probably not a wise idea if you have little to no time. When i started i spent easily 2-3 hours a day researching and learning, and 8-10 hrs on weekends, but eventually you get enough knowledge and confidence to understand the market even a tiny bit. Then you got a slight edge over most other people. If you try to skip this you are basically gambling your money and very likely to lose it.

    btw, i am not a qualified financial planner, and what i said is not professional advice, just a personal experience/opinion.

  • geoffs87 on 21/10/2016 - 09:11
    +1

    Hey mate, well done saving up the 20k. Living in a city like Melbourne can be a costly exercise!

    CommSec is actually the broking arm of Commonwealth Bank, just like NABtrade is the broking arm of NAB. Can't hurt to set up an account with the major brokers and see which one you are most comfortable with. If you look deep enough, the platforms generally do have plenty of information for beginners about how to trade, and the research can help you with what to trade in (some even provide recommendations)

    If you go shares - i suggest diversify across sectors (don't just throw your $20k in one stock). For if the price of that stock goes down, your entire portfolio drops. Helps to get a bit of a mix of growth stocks (ones which don't pay much dividend but have a history of reasonable growth) and Income stocks (higher dividends, but not huge growth).

    For the money saved, something like shares in a Managed Fund is probably what you're after.

    This is a pretty good idea, buying into managed funds, or index funds (funds that track the index like ASX 200) will take the guesswork out. The salary sacrifice into super option is good also, moving forward (especially if you aren't looking to buy a house).

    Of course, i'm not a financial planner, and do not want to give any specific advice as i don't know your circumstances. If you are serious, it can't hurt to get some professional advice!

  • mick123 on 21/10/2016 - 09:27
    +2

    with everything you are saying ($20k, no experience in sharemarket, time poor, and as you say yourself - you don't feel you know much about the market) - a managed fund or ETF sounds right for you.
    Some are riskier and some are more conservative. maybe split your funds to what appeals to you.
    Once you invest it, forget about it for a few years.

    I don't think you can do top-ups on ETFs though (eg. adding $100 a month)

  • kingsville on 21/10/2016 - 09:47

    As mick123 said, a key difference between managed funds (like from Colonial First State) and indexes/ETFs (like STW or IOZ) is that you can do monthly savings plans with managed funds, whereas ETFs you buy in one big chunk and pay brokerage.
    The ongoing fees, however, are significantly less for EFTs.

    Make sure you leave a little bit of cash accessible in case of emergencies!

    BTW: this is what ETFs are: https://www.spdrs.com.au/education/files/Fundamentals_of_ETF…
    They are an easy way to invest in a range of companies, rather than putting all your egg$ in one or two baskets.

  • Gunther on 21/10/2016 - 11:09
    +1

    "Im 29, renting in the Melbourne inner suburbs and come to terms with the fact that I will be renting forever so putting it towards a house isnt on the cards."

    Why have you discarded the idea of purchase a property? Its not that hard. Refer to 'smash avocados'.
    http://www.sbs.com.au/comedy/article/2016/10/17/i-stopped-ea…

    -First home buyers opportunities.
    -Find a partner and enjoy dual incomes.
    -Entering retirement ages without a primary residence asset will not be fun.

    • geoffs87 on 21/10/2016 - 14:46

      agreed, I'm 29 and my partner and I own 2 properties between us in Sydney (about 60% LVR), neither of which were cheap (both <5km from CBD).

      We have decent, but not huge salaries (combined <$200k), it just means we had to scrimp where needed, but all about making the right decisions. FYI - zero support from parents, they couldnt afford to even if i needed it!

      Oh, i don't eat avacado, so thats a huge saving right there too :)

      Happy to give more tips if needed!

  • Skramit on 21/10/2016 - 11:13

    Here's some points and questions you should think about:

    1) How likely are you to need to convert the investment to cash at short notice - e.g. to buy a house, to pay for a holiday, to pay for children, to get married etc. If the answer to all of these is 'no, dont need cash in the next 5 years', your investment options broaden significantly.

    2) Given you are "only" 29 and I assume you have no dependants or you would have mentioned them, your investment risk in all honesty should be higher than somebody who is 55 and getting prepared to retire in the next 10 years. So whilst it's easy to say "I want something safe", you might as well not bother at all and just put it all in an term deposit account with a bank and earn a measly 3% interest. There's nothing wrong with that. But in your "life situation", a little bit more risk is probably worth it IMO but you have to agree of course ;)

    3) If I were you and knew NOTHING about shares, I would only go this route on the backing of a professional broker who will guide, advise and do the purchasing and management of your portfolio. If you're not prepared to pay a broker for this service as a complete rookie, please avoid the share market. Brokers get a bad name on this forum, unfairly IMO, but there are lots of good ones out there who are honest and will help you build wealth over time. People have to remember that brokers are not fortune tellers but they do draw on a wealth of knowledge, research and experience and they are generally quite effective or the broking industry simply wouldnt exist. Jumping in to NABtrade having read a few "shares for beginners" is definitely not advisable.

    Shares would be my suggestion if you want to start small. if you have say $20k you could quite easily buy 3 companies 7k,7k,6k and be prepared to watch them grow over say 5 years and earn dividends. But again don;t do this without solid professional advice and help.

    4) Super contributions is an excellent way for forced saving for retirement given the 15% tax rate. However this investment is locked away generally speaking until retirement so if you do want to buy a house or start a family, or both, i would advise against this option until you're a bit further on in your life stage. You will likely need the liquidity of cash well before you can access your super.

    Good luck.

  • fruit on 21/10/2016 - 11:59
    +2

    All on black

  • chazfg on 21/10/2016 - 12:28

    "Thanks from soemone who knows nothing about shares/investing."

    Firstly, you should invest in yourself. Get the education on shares and investing sign-up on free seminars (don't get sucked right into membership), read some books and join investment forums online. You might be time-poor, but investing 20k on something you don't understand then you will come out money-poor.

    Also consider getting your risk assessment done first, so you understand your own risk appetite. Look for free ones, normally done by financial planners.

  • nivag01 on 21/10/2016 - 12:58
    +2

    Look in to Argo or AFIC which you can purchase on NABTrade. They are listed investment companies. But learn about the share market and don't get sucked in to day trading as you will lose your money, it's a long term investment.

  • MITM on 21/10/2016 - 13:02
    +1

    Take a look at www.fool.com.au
    These guys put their money where their mouth is.
    Read through their track record, read the forum, stalk them for a while - then they'll hold your hand when you're ready to invest.

    • geoffs87 on 21/10/2016 - 14:48

      OzBargain

      Have a read of this for some tips/comments before locking into anything like motley fool etc.

      • MITM on 21/10/2016 - 15:02

        Nice reference, current too.

  • indium on 21/10/2016 - 13:13

    I'd recommend learning yourself from http://www.ruleoneinvesting.com/podcast/ which was recommended to me on ozbaragain. Have personally seen the rewards and benefits from this already. Can answer any questions about it if you're interested.

  • Solarlux on 22/10/2016 - 10:12

    If you don't gamble then don't invest in the share market!!! I would recommend investing in housing, good returns and great tax incentives, almost anything you spend on the property is tax deductible and you only pay 50% of the capital gain if you sell. You can even get positively geared properties occasionally. You get a property manager to take care of things. Buy somewhere that you may like to retire to and you may eventually live in it yourself. Coastal but not too close to the sea level!!! Something solid that can be easily renovated later and easily rented out now. Keep it insured well.
    Take advantage of the negative gearing while it is in place. When they kill it off they will most likely allow it still for existing properties.

  • ROTJ on 22/10/2016 - 10:41

    The sharemarket is not a logical beast; no matter how much research you do, you won't be able to predict the market in the short to medium term … even the brokers and self proclaimed experts cannot do this! You mentioned you are super time poor and have no interest in monitoring things + don't want any risk. My advice is that share investing is not for you. However, if you really do want sharemarket exposure without monitoring and you can get your head around the short-medium term volatility that comes with such investing; then I suggest you open one of the no advice, low cost broking accounts like Commsecs, NABtrade, E*TRADE etc and buy (as suggested by nivag01 above) $20k of AFIC or Argo. By doing this, you will have a low cost investment that pretty much tracks the fortunes of the sharemarket overall. I'm not a fan of managed funds that have fees and commissions built in to pay for fund managers that will get you no better results than investing as suggested above.

  • djkelly69 on 22/10/2016 - 21:10

    Where to start? Get professional advice.
    /thread

  • Oofy Doofy on 22/10/2016 - 22:06

    From least risky to most risky: Savings accounts, Bonds, Property/Listed REIT's, Aus Equities, INT equities.

    Do some research, grow some balls and pull the trigger on what you're comfortable with.

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