To finish off our blog series for MoneySmart Week we thought we would try to cut through some of the mystery that surrounds the sharemarket, and makes it seem pretty inaccessible to the average Aussie. The reality is that investing doesn’t actually have to be all about high pressure, big risks and masses of money. Mozo’s Kirsty Lamont recently spoke with Sarah Michaels from news.com.au about how to invest in the sharemarket when you don’t have much money. Here’s a summary of her top tips:
1. Invest via a fund.
This will give you what the pros call “instant diversification”, which basically means you won’t be putting all your eggs in one basket, and what little money you do have will go further.
2. Pick your fund type wisely.
There are two types of funds: managed and exchanged traded. Managed funds are good for rookie investors because they’re looked after by professionals. Downside? You have to pay said professionals, which can really eat into your earnings.
Exchange traded funds, on the other hand, give you instant diversification at a lower cost. As opposed to being managed by a professional, they track an index, like the S&P ASX 200. So if you don’t have much cash but have confidence in your capacity to track your investments, exchanged managed funds are the way to go.
3. Steer clear of cultural investments.
Although shares in art, fine wine, or connoisseur products might appear cheaper, you need to be a proper expert in any of these fields to reap a return on any investment. Stick to boring, successful businesses to make your little investment go a long way.
4. Be ready for the crash.
It’s the nature of the sharemarket beast: crashes will happen. Make sure you’re prepared for the worst, and set up an emergency fund. The good news is that in only investing a small amount, you’re minimising risk. Phew!
Have you ever had a go at the sharemarket? Comment below with your story.