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Lesson 6 transcript

Why do you want to invest? It’s important to be clear on your goals as this will help you determine how to invest.

The reasons people want to invest can be broadly categorised as time-based (which we already discussed in Lesson 4) or goal-based.

Time-based, such as to grow wealth over time

Time-based investing refers to the broad goal of building wealth over time. Such as saving for retirement.

Time-based investors typically have a long-term approach to investing, which means they intend to hold onto investments for a period of years.

This is sometimes referred to as a ‘buy and hold’ strategy. On the other hand, goal-based investing has the objective of attaining a specific life goal, such as saving for a deposit to buy a property.

Goal-based investing

Goal-based investing can either be short-term or long-term. A short-term investment is one which is generally held for around one to two years.

It’s important to be clear on your investment goals, as these will largely direct your investment strategy. For example, are you looking for capital growth to help you buy a home, or do you want to establish an income stream perhaps during retirement?

Exchange traded funds (ETFs) can be a good way to gain exposure to either growth or income investments, and some can offer diversified exposure too. For example, instead of investing in a single stock, a growth-oriented investor could choose to invest in a basket of stocks.

For example, through the Betashares Australia 200 ETF (ASX: A200) or the Betashares S&P 500 Equal Weight ETF (ASX: QUS). This means that in a single trade, the investor gains exposure to a diversified portfolio of Australian or US listed companies.

Setting invest goals - and sticking to your plan

Here’s an example to illustrate the importance of sticking to your investment goals (and thus your overall approach to investing).

Holly’s medium to long-term investing goal is to save for a house deposit. With this in mind, she decides to invest for growth, choosing established listed companies both internationally and domestically.

After careful research and investing in a diversified share portfolio, she’s grown her portfolio to be worth $70,000. However, a friend of hers says she’s made profits much faster in her portfolio, and shares her latest speculative stock tip.

Holly decides to sell $10,000 from her portfolio to invest in her friend’s tip. But the company falls sharply, and she ends up losing $8,000, impacting her main investment goal.

It’s very rare for people to get rich ‘overnight’, which is why it’s important to remain focused on your goals, grow your wealth steadily over the long term – and not to get distracted by short-term opportunities. If an opportunity seems ‘too good to be true’, it probably is.

Betashares Capital Limited (ABN 78 139 566 868 AFSL 341181) (Betashares) is the issuer. Before making an investment decision, investors should consider the Product Disclosure Statement (PDS) and Target Market Determination (TMD), available at www.betashares.com.au. This information does not take into account any person’s objective’s, financial situation or needs and is not a recommendation or offer to make any investment or to adopt any particular investment strategy. Investors should consider the appropriateness of the information taking into account such factors and seek financial advice. Investments are subject to investment risk, investment value may go down as well as up, and investors may not get back the full amount originally invested. ASIC’s MoneySmart website has useful information for people considering investing. The MoneySmart resources can be found here – https://www.moneysmart.gov.au/investing. ASIC’s MoneySmart website has no affiliation with Betashares.