Investing is Like Buying a Car
If you’re single, married, or with kids – chances are you probably own a different car being in a different stage of life. Investing is like buying a car, you have to know when to upgrade, get something more reliable or something fast. Here’s why:
Understand Where You Are
We are all in different stages in our journeys of life. Some are married, with kids, single or just starting out. Host Andrew Baxter says investing in accordance with your stage of life is just like buying a car – there are times when you need to change what you drive to match where the road you’re driving on. After spending over 29 years as a professional investor, Andrewtells the story of a conversation he had with a prospective client which contradicts all of the above philosophy. As a 62-year-old nearing retirement and what would be classified as a ‘low risk investor’, he couldn’t believe some of the volatile speculative shares she held in her portfolio, recommended by an advisor. In a situation where this unassuming lady was receiving mixed messages from a range of sources, Andrew took her to the investment caryard to ensure she was sitting in the right seat. The key – understand where you are in life so that you can driving (investing) in the right car (asset).
Buying your First Car
Like when buying your first car, investing for the very first time is simply a matter of getting in. Take the philosophy that ‘anything will do’ and just find something that gets you from A to B is the advice Andrew would give to those just joining the investment game. Really the idea is to gain momentum as it’s always easier to keep moving forward once you get started. With that advice – get yourself a trading account open or find an affordable unit and just pull the trigger.
Upgrading to Something More Reliable
Picture this – you’ve spent a couple of years driving around in your 2002 Honda CRV and are finally ready to upgrade. You’ve got a full-time job and so you know a little more about the world and want something a little newer and more reliable. Investing is much the same. After dipping a toe in the water, buying some shares or your first affordable home, the notion of buying something based purely on affordability is gone. Now, it’s time to do some research, employ some more capital and get a little more serious about investing in quality businesses. So, it’s time to head down to the Toyota garage and grab yourself a Corolla so to speak.
Time to Have Some Colour
Now you’re rolling. You’ve been in the car game for a few years now, gotten past your first car and are now driving something more reliable. After a few years, chances are you’ve had a promotion or two at work and have managed to get a decent financial backing behind you. Just like you would start now to shop for a car with a little more colour, so to would you with your investments. This is where you would start, once you have your core property or shareholdings down pat, start to involve some more spicier or premium holdings. This is the stage of life where you are prepared to take risks, albeit have enough experience on you to deal with any major setbacks – the thought process co-host Mitch Olarenshaw used when he bought his Mercedes sports car or like Andrew did when he purchased a Ferrari.
Allocate your Assets
Now we’re getting to the pointy end of your car shopping journey. After a number of decades in the game, a good financial backing behind you and probably a change in life circumstances (maybe some kids or a spouse), it’s time to allocate accordingly. Applying this to the investment landscape, this is when you have demonstrated a track record of investment success and now have a myriad of assets to manage. Just like you would have the surf truck, the people mover, the range rover, and the Sunday driver – you’ll have your property, shares and other assets allocated accordingly for you. Your stage of life now has changed dramatically as your needs have, so just like you would manage your fleet of vehicles for the family is how you would in your investments. The overarching message – just as you move through life and buy various vehicles to suit your situation, you have to do the same with your investments. Situations change and so to do your needs and risk appetites – having clear signposts to identify this is critical. Reach out to Australian Investment Educationto learn more about why this is.