Investing is a powerful tool for building wealth and securing your financial future, but before diving in, it's essential to lay a solid foundation. Here are key steps you should consider before making your first investment.

1. Understand your financial situation

Before you start investing, take a close look at your financial health:

  • Pay off high-interest debt: High-interest debts, like credit card balances, can significantly hinder your financial progress. Focus on paying these off first to free up more money for investing.
  • Start building your emergency fund: Make sure you have savings set aside for emergencies. This safety net gives you peace of mind, so you can invest without worrying about unexpected expenses.

2.  Educate yourself

Before investing, it's important to have a basic understanding of how different investments work. Learn about:

  • Managed Funds: Professionally managed portfolios that pool money from multiple investors to invest in a variety of assets.
  • Exchange Traded Funds (ETFs): Pooled investment vehicles offering diversification.
  • Shares: Equity investments offering ownership in companies.
  • Real Estate: Property investments that can provide rental income and capital appreciation.

3. Define Your investment goals

Understanding why you're investing and what you hope to achieve is crucial. Your goals will shape your investment strategy:

  • Short-term goals (less than 5 years): For goals like saving for a home deposit payment, consider safer investments such as high-yield savings accounts or bonds.
  • Medium-term goals (5-10 years): A balanced portfolio with a mix of shares and bonds can be suitable.
  • Long-term goals (10+ years): Investing primarily in shares can offer higher returns, suitable for retirement or long-term wealth accumulation.

4. Assess your risk tolerance

Investing involves risk, and understanding your risk tolerance helps in selecting the right investments. Factors influencing your risk tolerance include your age, financial goals, and comfort level with market fluctuations. Typically, younger investors can afford to take more risks, while those nearing retirement might prefer more conservative investments.

5. Create a budget and automate savings

Having a budget helps you identify how much you can afford to invest regularly. Automating your savings and investments ensures consistency. Set up automatic transfers from your bank account to your investment accounts, ensuring you regularly contribute without having to remember each month.

6. Diversify your portfolio

Diversification helps reduce risk by spreading investments across various asset classes. This means not putting all your money into one type of investment or sector. A well-diversified portfolio can better withstand market volatility and provide more stable returns over time.

By following these steps, you'll be well-prepared to start your investing journey. Remember, successful investing requires a solid financial foundation, clear goals, and ongoing education. With the right preparation, you can make informed decisions and build a secure financial future.


To learn more about investing, go to Investing hub in the CommBank app.

This content is brought to you by Girls that Invest.