Wealth Accumulation
Wealth accumulation is the process of growing your savings to ensure you have enough money for future needs, such as your retirement. Wealth accumulation is an important part of your financial plan and you should seek professional financial advice to hep you decide which options are best for your individual situation.
Before you start:
Set your financial goals
Decide on clear goals based on your situation and circumstances. How much money will you need in retirement? Are there any large purchases (cars, houses, holidays) you might need to make in the future?
Understand your risk tolerance
Understand your risk tolerance. This is how much money you are willing to invest and how comfortable you are if your investments go down in value on occasions. This will help you decide where and how to invest your money, whether it be more stable investments with smaller returns, or higher risk investments with larger returns.
Determine how long you wish to invest
This will help you decide on what type of investment you should consider.
Investment options:
• Contributing to your Superannuation
• Purchasing property (houses, apartments, land)
• Fixed interest (bank accounts)
• Purchasing Australian and international shares
• Cash
Maximising your investments:
There are a few simple rules you can follow to ensure you are maximising your investment portfolio.
Avoid quick-fixes
You can make more money by focusing on long-term investments and re-investing the money you make from them, rather than pulling your money out as soon as you make a profit.
Reduce your risk by widening your investment portfolio
Combining investments such as a mix of shares, fixed interest and property, will provide you with adequate profit while taking into account your risk tolerance. Dividing your money like this means that you will not lose all of your money if one of your investments does not work out. You are minimising risk by spreading your portfolio.
Use investment gearing
Investment gearing is borrowing money to invest to increase your profits. This should be thought about very carefully however, as you can lose a lot of money if the investment goes wrong.
Calculators:
References:
http://www.ioof.com.au/__data/assets/pdf_file/0018/90603/Wealth_Creation_Strategies.pdf