Investing often appears complex, but growing your wealth doesn’t have to be hard. The key is to focus on the bigger picture. By knowing what you’re doing, why you’re doing it and how you’re doing, you’ll be on the way to building a bucket list that’s close to overflowing.

Tip 1 Seek good financial advice

A good financial plan takes a holistic approach to your wealth, and a good financial planner will help you build a financial plan that not only creates your wealth, but protects it.

Time is one of the best ways to build wealth — it reduces the risk of negative returns and lets your investments harness the full power of compounding returns. Understand how long you want to invest for and work with your financial adviser to choose the most appropriate investments for you.

All investing involves a trade-off between risk and return. The higher the risk, the higher the potential long term return. It’s important to understand the level of risk in your investments and how this affects your investment strategy and goals. This leads us to…

Diversification is all about spreading your investments over a range of asset classes. It’s a very powerful way to reduce risk. Various types of investments perform better at different times, so it makes sense to balance your investment to take advantage of different asset classes as they move through different market cycles.

History tells us that if you invest in the asset class that performed the best last year, it’s unlikely you’ll enjoy top performance again this year. Instead, you should assess each investment on its own merits. Look forwards, not backwards.

It’s wise to have regular reviews of your strategy and portfolio, but resist the temptation to chop and change your strategy each year. Seek advice and look to the long term. A written financial plan, clearly outlining your long-term investment goals, is the perfect antidote to short-term panic.

An easy trap to fall into is to concentrate on tax savings, rather than why you invested in the first place. There are many great ways to invest tax-effectively — like holding your investment for more than one year, investing through your super and paying interest on your investment loan in advance — but saving tax shouldn’t be your primary reason to invest.

We live in an uncertain world. Unexpected natural, political and economic events are all shaping the direction of share markets. So how should you react to an unexpected event? The answer is simple — don’t panic. It’s important to think long term when crisis strikes. There is compelling evidence that ‘panic selling’ is bad for your wealth in the short term.

Even the smartest investors use managed funds. Why? Because managed funds employ disciplines many investors lack. Investing through a managed fund can increase your discipline, utilises expertise of investment professionals, removes personal investor bias, and increases simplicity, economies of scale and choice.

Unearthing hidden investment gems is every investor’s dream. The problem is hidden gems are exactly that –hard to find! The beauty about investing through a managed fund is that fund managers are trained to seek out value. Fund managers have greater research resources, more analysts, better investment technology and more experience. In short, they’re in the best position possible to hunt hidden gems on your behalf.

Contact us and make an appointment to talk to Mr Tim Blakeley of Lighthouse Advice, an Authorised Representative of Professional Investment Services (PIS), and the largest wealth creation group in Australasia. Tim can talk you through some of the simple things you can do today to set you up for tomorrow. Click here to Book an Appointment now.