investment 101
The Straightforward Guide to Investing. If you're new to investment, or you're thinking about becoming an investor, make sure you have a look at our guide to investing and then get in contact with us...
Most of the time people work for money; think of investing as getting your money to work for you. The reasons for becoming an investor and the basic principles behind being a successful investor are simple.
Why people become investors
Putting money into bank term deposits is a way of generating revenue, but it's generally considered that investing in ‘growth assets’, for example company shares, can offer a better return in the long term. People who have big long term goals choose to become investors. Your reasons for becoming an investor might be:
- To save towards your retirement and not just rely on NZ Super (see AXA's Business and Personal Superannuation or the AXA KiwiSaver Scheme).
- For your children’s education or for a big purchase like a house.
- For emergency funds, for life’s sudden unexpected expenses.
- To pass on to your children or grandchildren.
- To gain financial freedom, maintaining a lifestyle without financial stress or worry.
What you invest in
In fact it’s a good idea to spread your investment through a diversified portfolio, which means investing in a variety of asset classes, or types of investments. When you become an investor through AXA you can own ‘a well diversified portfolio allocated across several asset classes’.
A few words about risk
A general rule is that the higher the potential return of an investment, the higher the risk. ‘Investment risk’ simply means the possibility that returns will vary from what’s expected or that you will experience a loss from your investment. For example, cash is generally regarded as the least risky ‘asset class’. These returns are generally known in advance and the risk of them being different from what you expect is very small. ‘Equities’ or ‘shares’, offer the highest potential return. But share prices can be extremely ‘volatile’ in the short term or you may experience periods of negative returns from time to time. However, over the longer term they are generally expected to be the best performers.
The golden rules of successful investing
There are five simple principles which are generally thought to help make a successful investor:
- Get expert advice
Investing is about achieving specific personal financial goals. An adviser works with you to make sure that your goals are realistic and that your investments are designed to achieve those goals. Expert advice is vital.
- Invest for the long-term
Company shares fluctuate in value almost constantly - up one day, down the next, up the next. Volatility is all part of investment. Generally speaking, by being in for the long haul you can take advantage of the ups while minimising the effects of the downs.
- Invest in quality
Have investments that ‘have yet to achieve their true value’. AXA looks for investment opportunities that research shows have the potential to increase in value; such as well-managed companies operating in markets that will potentially experience growth.
- Diversify
Never put all your eggs in one basket. By diversifying, you can potentially benefit from the better performance of higher risk investments such as shares, yet have a level of protection when they’re not performing so well by being invested in a lower risk asset, like cash, at the same time. Simply put, when one kind of investment is down, another could be up, and your risk of losing money could be reduced overall.
- Stick to your plan to achieve your goals
Investment generally works best in the long term. If you’re serious about your goals, stick to your investment plan.
ASK AXA
Get in touch with us about becoming an investor right now, just call us on 0800 808 801, or click here to send us your details and we’ll get back to you and arrange a personal appointment with an AXA financial adviser.
For more information, please refer to the relevant Investment Statement.