Share investing is one of the pillars of creating financial freedom and is a great way to create passive income. But if share investing is new to you, it can be a minefield trying to figure out how to get started.
In this guide, we take you through what you need to know to get started and the practicalities of doing so.
Robo advice is where the platform selects the ETFs on your behalf based on the risk profile you’ve selected. There are a number of investing platforms that offer this service. Alternatively, you can select the individual ETFs or shares you’d like to invest in, however you will need to ensure the asset classes are in line with your risk profile and the asset allocation for it.
The platform you select is going to depend on the features that are important to you such as whether you want robo-advice or to select your own shares and/or ETFs. Once you have selected the platform, you will need to open an account (similar to opening a bank account except it’s done online) then deposit funds into the platform from your bank account ready to invest or set up an automatic transfer.
If you’ve elected to go with robo-advice, choose your desired portfolio in the platform and either invest some funds and/or set up an automatic transfer.
If you’ve elected to choose the ETFs or direct shares you’d like to have in your portfolio, select them on the platform and ensure they fit into the asset allocation for your risk profile. Determine what you would like to start investing in first.
If you’ve never invested in shares before or had a challenging experience, start small. This will allow you to see how you actually feel when the market fluctuates. You can then build up the amount you invest over time.
Pre-determining this helps ensure that your portfolio stays in line with the asset allocation for your risk profile. You can re-balance at regular intervals (eg quarterly) or when your asset allocation deviates by a certain percentage (eg 5% or 10%). Determine how you are going to re-balance. Some options are diverting new contributions to the underweight asset class, diverting dividends to the underweight asset class or selling the overweight asset class to invest in the underweight asset class or a combination of these.
Investing can be a great way to grow your wealth over time and build passive income. Before investing, you should decide how much money you’re comfortable investing and understand your risk profile. Freom there, you can decide whetehr to obtain robo advice, select ETFs or direct shares to buy, and choose a platorm that suits your needs. It’s important to start small and gradually build up your investments, rather than trying to invest too much too quickly. You should also determine when and how to rebalance your portfolio if you’re investing in shares or ETFs, and schedule a time each month to review your portfolio and make any necessary adjustments.
