We receive a lot of enquiries from potential investors asking, is now the right time to invest in the stock market?
With spending on a downturn, many Australians are saving more than ever. As a result, many are looking to start investing – whether it be in property or the stock market.
There is no crystal ball with the stock market. No one could have predicted the onset of COVD-19 and the impact it had on markets across the globe.
But, when it comes to investing, there are three golden rules.
The 3 golden rules of investing in the stock market
Make a start
If there is one for certain, it is better to be in the market than not at all. Time in the market is really what makes all the difference.
Markets fluctuate on a daily basis. They go up and they go down. However, despite this volatility, there is generally consistent growth over time.
Diversify your investments
Asset returns differ from year to year. One year they may be the best performer, and the next they may drop. This is why portfolio diversification is so important.
Spreading your money over a diversified portfolio of different asset classes (such as property/ bonds/ cash / Australian shares / International shares) will ensure you maximise your return and minimise your risks. As they say, you don’t want to put all your eggs in the one basket.
Reinvest your dividends
If you were to reinvest all your distributions, you will benefit from the compounding interest effect. The money you make on your investment will in turn make more money due to the compounding effect.
It can be tempting to pull your dividends, yet evidence shows, with a strict investment strategy and holding your investments, you will see a greater long-term gain.
Investing in the share market is a long-term game. Check out this video from Vanguard Australia: