Before you start investing, it's important to define your goals. What do you want to achieve and when do you want to achieve it?
It is important to work out how much time you have to reach a goal so you can determine what type of investment will best help you achieve it.
Goals generally can be classified as:
- short-term - one to three-year time horizon
- medium-term - three to five-year time horizon
- long-term - five-year plus time horizon.
For example, investing for a deposit on a house generally requires a short-term return. Investing for retirement requires a longer-term option. Your financial goals may include:
- saving for a home
- saving for children's education
- planning for retirement
- estate planning
- financial security.
Keep in mind, the earlier you start to invest the better off you will be. As well as having more time to accumulate wealth, you will benefit from compound returns on your earlier investments - you'll not only earn interest on the money you contribute, but also on the cumulative interest earned on those funds. That is, interest on interest.
You need Adobe Reader to view PDF files. You can download Adobe Reader free of charge.