4 things you need to do before you start investing

A research report from RMIT on women and money in Australia found that 48% of women were not willing to take any financial risks at all. For many women, their hard earned savings is not something they are prepared to risk.

A common perception of your typical investor is what we see in mainstream media from movies like The Wolf of Wall Street. What we aren’t shown is that there are several ways to invest and many of them don’t involve speculating on hot stocks.

In fact, before you start investing, it’s crucial to assess your risk profile – your attitude towards risk and volatility, and pick your investments accordingly. There are different asset classes you can invest in that having lower risks and some that have higher risks.

If your goal is to grow your money, it is also worth considering that keeping it in a high interest savings account is not the best idea after considering tax and inflation. High interest savings accounts are safe, but they present a different kind of risk  –  the risk of reducing the purchasing power of your money (i.e. inflation) and the risk of not meeting your financial goals effectively.

How to start investing

There are a few things we recommend having sorted out before you start investing to protect yourself. Even though it may seem daunting, once you get into the habit of things, there is a ‘snowball effect’ that makes things easier.  

Pay off your ‘bad’ debt

It doesn’t make sense to invest if you’re still paying off credit card debts. Credit card debt typically has very high interest rates, which is likely to be higher than the long term return from your investments.

Build up an emergency fund

Having about two to three months’ worth of living expenses can save you if you lose your job or are slapped with a hefty and unexpected cost. This will help protect you for those rainy days. Calculate how much you should save in your emergency fund here.

Understand your risk profile

A risk profile is an evaluation of your willingness to take risks. It takes into account your attitude towards market volatility and how long you look to invest for. When it comes to building a diversified investment portfolio, you’ll need to understand your personal risk profile to pick the right investments. Learn more about your risk profile through our free risk questionnaire.

Research and start small

If you are completely new to investing, start with researching the basics online. Here are some recommended resources:

After researching, start your investment portfolio with a small amount and build it up from there.

Till the end of March, if you #startsomethingnew with Clover and sign up, you will receive 6 months free investing. T&Cs apply.