The simple investing habit that builds wealth over time

Building wealth isn’t about how much you earn or even how much you can afford to save. At its core, wealth building follows one basic principle: developing long-term investment habits.

Investing doesn’t diminish the importance of saving. After all, you can’t invest money if you haven’t saved it first!

Get started by opening a dedicated bank account and commit to putting aside a set amount each pay.

Most banks offer savings accounts where, provided you make regular deposits and no withdrawals, they’ll throw in features like reduced fees or bonus interest.

These accounts are a terrific vehicle for kick-starting your savings. Even with bonus interest, though, their earning power is limited. Unless cash accounts form part of your overall financial plan, they’re not recommended as a viable wealth-building tool.

Once you’ve accrued some savings, look for opportunities to invest your money where it can begin working towards real wealth creation.

Growth investments, like units in managed funds, tend to offer greater wealth-building potential over a longer term.

New investors are often discouraged by the volatility of these units as their value rises and falls with market fluctuations.

So, what if there was a way to invest while minimising this risk? There is!

What is dollar cost averaging?

Dollar Cost Averaging (DCA) is a strategy where you invest fixed regular amounts. When prices are high, your deposit buys fewer units. When prices fall, it buys more. Making regular contributions means the price you pay varies, which averages out over time.

It’s important, however, that you consider your options carefully.

Many people choose managed funds because they give small investors access to a wide range of quality investments, administered by experienced fund managers.

Regular investing combines this professional management with the benefits of DCA. The hard work gets done for you.

Getting the right advice

The right investment depends on what suits you best, and this is where speaking with a financial adviser makes a real difference. If you don’t have one, ask a trusted friend for a referral to theirs or contact the Financial Advice Association Australia.

A financial adviser will work with you to identify investments most appropriate for your needs, circumstances, and risk tolerance, that is, what you can comfortably sleep with.

Your adviser will help you navigate the fine print around fees, opening deposit, monthly amount, fund structure, risk, withdrawal arrangements, and everything in between.

Setting up regular deductions from your bank means you don’t even have to think about it. Better still, chat with your payroll department. Some organisations will facilitate post-tax deposits directly from your salary on your behalf.

The long game

Building wealth is a long-term strategy, regardless of where you’re at in life.

Wealth creation doesn’t sit alongside your financial journey. It’s the road your journey is on.

Speak to a professional financial adviser today and take the first step.