Investing Basics

Investing is an essential step toward financial independence, especially for women business owners who are already navigating the complexities of running a business. How do you learn to invest though?  All the information and the jargon is overwhelming.  Then there is the fear of failure and losing money. If you’ve been contemplating investing but aren’t sure where to start, this will help you to understand some fundamentals.

Understanding Why You Want to Invest

Before diving into the mechanics of investing, it’s crucial to understand how much you want to make and the lifestyle that you want. Ask yourself: What is the ultimate goal of my investments? Whether it’s for a comfortable retirement, funding your children’s education, or achieving a specific lifestyle, knowing your “why” will guide your investment decisions and help you stay focused during market fluctuations.

Breaking Down the Basics of Investing

At its core, investing is about buying assets that will appreciate in value over time or generate income. These assets can include property, stocks, bonds, or other financial instruments. The key is to choose investments that align with your risk tolerance and financial goals.

1. Property: Investing in real estate can provide both income (through rental payments) and capital appreciation. However, property investment requires significant upfront capital and is less liquid than other investments, meaning it can’t be quickly converted to cash.

2. Stocks/shares: When you buy a share of a company, you own a piece of that business. Stocks can offer substantial returns, especially over the long term, but they also come with higher volatility. It’s essential to diversify your stock investments across different sectors to mitigate risk.

3. Managed Funds and ETFs: For those who prefer a more hands-off approach, managed funds or Exchange Traded Funds (ETFs) allow you to invest in a diversified portfolio of assets without needing to pick individual stocks. ETFs, in particular, are becoming increasingly popular due to their lower fees and ease of access.

The Role of Mindset in Investing

Your mindset plays a crucial role in your investment journey. Many women are held back by fear—fear of losing money, fear of making the wrong choice, or simply fear of the unknown. Overcoming this requires both education and self-awareness. Understand that risk is inherent in investing, but so is the potential for growth. By educating yourself, starting with small, manageable investments, and gradually increasing your exposure as your confidence grows, you can overcome these fears.

Portfolio Diversification

This is a common investing term and essentially means that you are balancing the investments that you have to match the risk you are prepared to take. The balance is between "Defensive Assets" (like cash, term deposits and fixed interest - safer assets) and "Growth Assets" (like shares, property, ETFs, Managed Funds, Cryptocurrency, etc. - riskier assets). 

When you're in your 20s you could have 80% Growth and 20% Defensive assets.  As you grow older this ratio will shift until you have mostly Defensive Assets, so that you have a secure amount of money to live on in retirement.

Taking the First Step

The most important step in investing is to start. Whether you begin with a small amount through micro-investing (here is my free guide on micro-investing) platforms or by setting aside a portion of your income to buy an ETF, the key is to get started. Over time, your confidence will grow, and so will your portfolio.

To actually place a trade, you will need an online broker platform (there are many!), such as Commsec, Bell Direct, Xm, eToro, Vanguard Personal Investor, and many more.  Do an online search to look for comparisons and choose one that suits your needs.

Investing is not just about growing your wealth; it’s about creating financial security and independence. By understanding your goals, choosing the right investments, and cultivating a positive mindset, you can build a financial future that supports your life and your business.