Summerland Credit Union - Loans, Saving, Investing, Insurance

Generation Y - Make your money work harder

Too young to start investing? It’s never too early to start; in fact, the earlier you start investing, the better – not only you will have more time in the market to increase your potential returns, but you will reap the benefits of compounding interest (or interest on your interest).

A good place to start is to look at your super. Your super fund invests your money for you, so getting to understand your super will give you a broader understanding of investing.

Your goals will ultimately shape the way you approach the sharemarket. Whereas saving is for the short-term, investing is for the long term so remember that it’s not about timing the market (trying to predict the highs and lows) but rather about time in the market. With time on your side to ride out the market fluctuations, you may be willing to take on a higher level of risk for a higher potential return.

Managed funds

In terms of an effective long-term investment plan, the traditional bank savings account and fixed term deposit fall short of the mark; these are only savings accounts not investment accounts as they only offer a standard rate of return and no prospect of capital growth. As an alternative, providing you have an investment timeframe of at least five years, managed funds have the potential to offer higher returns compared to cash and fixed term investments.

Managed funds pool your money with that of other investors to give you access to a world of investment opportunities. They also offer an easy way to invest in particular asset classes such as Australian and international shares without having to do all the research yourself. And, you can spread your money across different asset classes, reducing your risk but also increasing the potential for growth.

When investing in a managed fund, one of the benefits is capital growth as a result of rising unit prices but you will also receive income from distributions. The income you receive is taxed in the same way as bank interest, at your marginal tax rate. You also receive ‘franking credits’ for the dividend income you receive, which reduce the tax payable.

What is an asset class?

An asset class is a categorisation of investments with distinctly similar attributes, for example Australian shares (or equities), international shares (or equities), fixed interest, property (direct or listed on the share market) as well as ‘alternative’ investments. Each asset class carries a different level of risk vs return – that is, they all perform differently. Diversifying your investment across a number of different assets classes is a smart way to reduce your overall risk.

How much do you need to start?

Depending on the fund you choose, you can start with an initial investment of as little as $1,000. Then you can make regular payments to purchase more units. Salary deduction is an ideal way to establish a regular investment plan and you reap the benefits of dollar cost averaging.

What is dollar cost averaging?

A dollar cost averaging strategy is simply investing the same amount of money at regular intervals over a period of time. In so doing, you actually reduce market risk; when the market is down, you receive a higher number of units and when the market is up, you receive a lower number of units. However, over time, you get a lower average price per unit.

Start a good habit

A Bridges financial planner will help you develop and manage an investment strategy that suits your goals, circumstances and needs, all while you continue living your life!

To find out more about the financial issues that affect your generation, Bridges have created a ‘Taking care of MY generation’ guide. Logon to www.bridges.com.au to view an eGuide or call Summerland Credit Union to order a printed copy.

For more information on Bridges’ services or to arrange a complimentary, obligation-free initial consultation with a Bridges financial planner near you, please call Summerland Credit Union on 1300 802 222 and start making the most of your money now.

Bridges Financial Services Pty Limited (Bridges). ASX Participant. AFSL No 240837. This is general advice only and does not take into account your objectives, financial situation and needs. Before acting on this advice, you should consult a financial planner. In referring members to Bridges, Summerland Credit Union does not accept responsibility for any acts, omissions or advice of Bridges and its authorised representatives.