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Why Invest?

Article By Adam Hurwood | | Financial Planning

People invest for many different reasons: Maybe you are saving for a big holiday, or to fund your children’s education, wanting to repay your home loan faster, or increase your retirement nest egg. After factoring in tax and inflation, chances are that funds held in low interest savings accounts may lose value in real terms over time. So, to stay ahead of inflation and taxation, you may need to invest in assets that deliver a higher return over time. The key to successful investing is identifying your investment goals and the time frame over which you want to invest.

Your Goals and Time Frame

When investing money, most people have a specific goal (or a number of goals). These goals can help you determine what investment time frame is required – short, medium or long-term. The time frame may influence how your money should be invested. The longer you invest, the longer you have to ride out ups and downs in the value of your investment (known as volatility). If you only have a short-term investment goal, it may make more sense to invest in more secure assets, such as cash.

Short-term investors would be more likely to choose a more conservative investment like cash, to ensure that their capital is available in the next one to three years. Long-term investors generally would be more inclined to invest in growth assets such as shares, as they do not need to access their capital for at least five years, so they are usually less concerned about short-term ups and downs. They recognise that the potential returns are higher in growth investments and if they are held over the long term the risk associated with short-term volatility is reduced.

To discuss investment options and the potential strategies that are most suitable for your needs, please contact Brett Moxey for more information.

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