It is said to be a quote (although some are sceptical) from Albert Einstein himself. The source may be questionable the premise is very accurate. An amount however small, invested and earning a return and that return then reinvested back into the investment.
“Money makes money. And the money that money makes, makes money.”Benjamin Franklin
The strategy of using passive funds to grow your worth is the basis of any good investment portfolio.
Now couple this with the strategy of regular investment, periodically setting aside money to invest, and you have the building blocks of a healthy portfolio.
We wrote about the importance of advice for all life stages in our article “How to Stay Ahead of the Pack”. Now we will look at these life stages and how regular investing and in turn, compound interest can be implemented.
You have little financial burdens and a lot of surplus income. The temptation is to ‘live your best life,’ but it is the perfect time to establish good savings habits. You can set your savings goals, whether that be a house deposit or a holiday and work towards that.
A regular savings plan into an investment portfolio of managed funds may be the simplest way to kick off your empire. It doesn’t matter the amount, the importance is getting into the habit early and regularly.
This is where your outgoings can really ramp up. From childcare, a new car, education or just day to day costs.
However with a bit of forward planning, you can lessen the impact down the road.
Setting up a regular investment plan for your children’s education when they are born can mature into a solid financial contribution in 12 or 18 years – when their high school or university fees come in. Couple this with an investment vehicle like an Insurance Bond can enhance your final return.
Possibly unbeknownst to yourself, you have been utilising the power of compound interest and regular investing throughout your working life.
By deducting your superannuation guarantee contributions every pay you have had a regular investment plan since the day you started work. By restricting access to your funds, your super has also had a compounding return.
With the kids (hopefully) no longer financially dependent on you, you have the capacity to funnel some of that excess cash flow every pay to complement your super contributions. You can do this as a salary sacrifice or a personal contribution, boosting your superannuation nest egg.
There is no sure thing in investing. Today’s darling maybe tomorrow’s dud. But by utilising the tried and true methodology of: regular investing, compounding returns and time you have the basis for a robust portfolio.
If you wish to discuss any of the ideas in this article, or indeed any aspect of your finances, schedule a no-cost Discovery Meeting with Louella Jorge, who can assist you in setting up your financial future.
Discovery Wealth – The Hills trusted name in Financial Planning.
The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. Louella Jorge is an Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429. This editorial does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information, you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser before you act.