4 steps for future wealth creation in your mid-20s to mid-30s
Investing can be challenging for anyone, but for those in their mid-20s to mid-30s, it can be especially daunting to build a portfolio – especially while paying off student loans, credit card debt and establishing some savings.
The reality is that people should start saving and investing as early as possible. The growth of savings and the power of compounding gives an enormous head start to those who can put money aside and invest in the early stages of their lives and careers – and building an investment portfolio is one proven way to grow money and wealth.
A
few
basic
principles
One
thing to
consider
before
launching
into the
following
steps is
whether
you have
accessible
emergency
savings
for a
rainy
day –
such as
three to
six
months’
worth of
living
expenses.
If you
do, then
now you
can
start to
consider
how to
build
your
future
wealth.
There are many different ways to build an investment portfolio. However, there are a few basic principles that you should keep in mind, no matter what approach you take.
Step
1
First,
every
investor
needs to
ask
themselves
the same
basic
questions
before
getting
started.
You need
to have
a clear
understanding
of your
investment
goals.
What are
you
trying
to
achieve?
Are you
looking
for
growth
or
income?
How much
risk are
you
willing
to take
on? You
might be
investing
to have
enough
money
for
retirement,
which
could be
decades
away.
But
equally
you
could
have
shorter-term
goals,
too,
like
starting
a family
or
buying a
larger
home.
With a clear goal in mind, you can create a realistic plan for achieving your objectives within a certain time frame. Choosing the right investing strategy matters when shaping your financial plan and a goals-based approach offers a new take on growing wealth. Goals-based investing focuses on reaching life’s goals versus trying to get high returns on your investment portfolio.
Step
2
Once
you know
your
goals,
you can
start to
identify
the
right
assets
to help
you
reach
them.
Asset
allocation
is all
about
deciding
how much
of your
money
you
choose
to put
into
different
types of
investments.
The main
types of
assets
people
rely on
for
investing
are
shares,
bonds,
cash and
commercial
property.
How you allocate across these different assets will be largely down to not only what you want to achieve, but also how long your investment time horizon is. If you’re comfortable with more risk and you want a greater chance of stronger growth, you might allocate more money into shares. But if you are looking for more consistent returns, then government and corporate bonds could be the way to go.
Step
3
You
also
need to
think
about
how you
are
going to
diversify
your
portfolio.
One of
the
golden
rules of
investing
is to
spread
your
money
across a
range of
different
asset
classes.
This
will
help to
reduce
risk and
ensure
that you
are not
too
heavily
exposed
to any
one
particular
area.
This approach means that if one or more of your investments rise you will benefit but, if they fall, there should be a degree of protection because, hopefully, some of your other holdings in different asset classes will be going up in value. So the most obvious reason to spread your investments around is that it reduces volatility and lessens the impact of any one share or asset class performing badly.
Step
4
Finally,
you need
to
review
your
portfolio
regularly.
It
allows
you to
stay
up-to-date
on the
performance
of your
investments.
This is
important
information
to have
so that
you can
make
informed
decisions
about
whether
or not
to
continue
investing
in
certain
assets.
Additionally, reviewing your portfolio helps you to identify any changes that you may need to make in order to reach your financial goals. Things change. Life happens. A divorce, an inheritance, helping out loved ones or a change in income could all have a significant impact on your financial situation. Ultimately, reviewing your investment portfolio on a regular basis is crucial to helping you to make sound investment decisions and stay on track to reach your financial goals.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.
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