At InvestaMatch we understand that dipping your toe into the world of investment can be daunting, as there’s a lot to learn and digest, and financial decisions to be made that can have a big impact on your future financial security. But just because something is tricky doesn’t mean it’s not worth doing- and we’re here to help you understand how you can take that first step with your hard-earned money.
Firstly- what do I need to do before investing?
Before getting into any investment plan, you’ll want to ensure that you have enough money for daily life, have cleared any outstanding high-interest debts that will cost you more than you will earn from any investing, and have at least three months of expenses saved in an easily-accessed account ready for any emergencies.
Next- have investment goals?
First off, it’s super important to know your reason for investing- your big ‘why’. What are you trying to achieve- your purpose and your goals. What is it that investing your money will help you accomplish? This could be retirement funds, a specific amount you want to earn for travel purposes, or perhaps your ‘why’ is more altruistic- you want to use your money for good, and help a business to grow.
There’s two questions you need to ask yourself:
- How long do I want to invest for? You may have goals for the short (1–3 years), medium (4–9 years) or long term (10 years plus). Each of those time frames would require a different sort of investing.
- Do I need to get my money out quickly? How easily you can turn your investments into cash is called ‘liquidity’. For example, a bank savings account is a high-liquidity investment because you can get to your money easily.
Ask yourself: what risks am I taking with this investment?
All investing requires taking on a certain amount of risk with your money. It’s never entirely a sure thing that everything will work out as planned. The higher returns you want, the more risk you have to be prepared to accept. In the short term, higher-risk investments tend to be more of a rollercoaster. Yet over the long term, they have the potential to grow your money more. There’s various ways to invest your money, and each has a different risk level associated with it:
- Investment funds
- Shares
- Bonds
- Bank deposits
- Property
- A business
If you’re more interested in investing your money for long term gains rather than speculating (such as using a platform like Sharsies), then investing in a business might be the best option for you. When you invest in a company, you’re loaning money based on its future ability to make money from the goods or services it produces.
I’d like to invest in a business- what options do I have?
Firstly- private lending. This is when you loan a set amount of your money to a startup or established business in order for them to meet their goals. You will agree on the length of time you’ll loan the money for, what interest rate will be paid on that loan and how much involvement you will have in the running and governance of the business.
Secondly- co-ownership. This is when you use your funds to buy into the business and so will reap the rewards of how successful this business becomes over time.
Thirdly- sweat equity. You may not have a large amount of money to invest in a business, but your skills and experience can be highly valuable. Over a period of time spent working in the business you will earn ownership as your investment.
How to invest ethically and responsibly
As you are choosing where to invest, you might be interested in doing some good with your money by investing ethically. It’s like using your dollars to vote for the future you want.
If this interests you, you’ll want to look for a business that doesn't risk damaging the environment or society and is well run (those that rate highly for their environmental, social and governance standards). And you could go even further by investing in organizations that aim to make a positive impact on our world, such as renewable energy companies.
So how much do I invest?
This is the million-dollar question, and every private investor will have a unique situation based on their goals and tolerance of risk. With investing, good advice can be gold. You can get investment advice from a range of people, including financial advisers, insurance companies, share brokers and banks. You’ll need to check that the adviser is qualified to provide what you need. A great place to start is with our community of trusted advisors.
InvestaMatch Is ready to help.
If you're planning to invest in a business opportunity or are looking for external investors for your business idea, InvestaMatch, NZ's online investment directory, is here to help.