New financial year, new you

By Vanguard

Investing Strategy

A new financial year can bring a chance to reset and focus on your investment goals. 

For many, a new year brings new beginnings and a chance to reset and focus on what matters most.

So, the imminent start to a new financial year may be a well-timed kick start for some to reflect on the year that’s been but also renew or reset investment goals for the year to come.

Here are some suggestions framed in the context of common new year’s resolutions:

Stop procrastinating (the start of your investment journey)

It’s never too early or too late to start investing. Of course, the earlier you start, the longer your investment time frame and the more compounding benefits you reap, but that shouldn’t put off anyone who has yet to do so.

What also shouldn’t put you off investing is the initial sum you need to start. Vanguard research found three-in-10 Australians believed they needed more than $10,000 to start investing, when in reality, Vanguard has a number of low-cost investment options that require only a $500 minimum.

Making your first investment can seem daunting, but just remember you’re already an investor through your superannuation, and that your future self and lifestyle will be grateful that you invested for the future.

 

Exercise more (control of your finances)

Nobody loves to budget but setting and sticking to one can be immensely beneficial, particularly if you’re feeling anxious about rising living costs.

Being more mindful of your money habits doesn’t necessarily mean restricting all discretionary spending, but rather, it’s to help you feel more in control of your financial situation. Having a budget can help you keep track of what funds come in and out of your bank accounts, what you might need to save to achieve your larger goals, and whether or not you have enough to cover any emergency or unexpected expenses.

Look at budgeting as source of comfort and control, rather than a set of rules and restrictions.

 

Don’t focus on the negative (returns)

Many investors might be feeling a little unnerved recently watching global markets swing from one extreme to the next. But as Vanguard has always advocated, investing should be viewed through a long-term lens and any short-term volatility, not matter how sensational, is just that: short-term.

Vanguard’s annual Index Chart visualises 30 years of market history and how various asset classes have performed over that period. Despite major events such as the dot.com bubble burst, the GFC, and the COVID-19 outbreak, markets have consistently trended upwards over time even with these dips factored in.

 

Find balance (in your portfolio)

Just like how it’s important to find balance between work and play, or balance in diets, it’s similarly important to find balance in your investment portfolio.

Having a diversified mix of assets is essential for investment success because it mitigates portfolio risk, as the best performing asset one year can be the worst-performing the next. Because markets are so unpredictable, the best thing investors can do to moderate such uncertainty is to not put all their eggs in the one basket.

A balanced portfolio also means periodic rebalancing. Over time, your strategic asset allocation may drift from its initial target as market fluctuations shift the weightings of each asset class within your portfolio. Rebalancing will make sure you’re not taking on more risk than you realise or are comfortable with, and that you’re not overweight in particular sectors or industries.