Get rich faster with this long-term investment winning strategy
A great way to grow wealth is using a set-and-forget strategy for your deposits and contributions, but you’ll need to understand the potential pitfalls.
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Autopilot is a handy tool on long-haul flights – which we’ll hopefully see again soon – and also great for lifting your investments sky-high.
Whether for savings, superannuation or the sharemarket, regular set-and-forget deposits are one of the most effective ways to build wealth. Setting aside $50 a week adds up to more than $10,000 within four years.
Deposits can be sorted quickly online or by calling your bank, super fund or adviser, but be sure to understand the tips and traps.
The investments must still be managed and reviewed annually or when your situation changes.
JBS Financial Strategists CEO Jenny Brown says autopilot works “to a point”.
“It’s great to set and forget, but then comes things like COVID, markets moving and your job security,” she says.
“Should you continue making those contributions or should you reassess? I like autopilot but there are buts and what-ifs.”
Make sure the asset mix continues to suit your situation, Brown says.
“Most people find it easier from a cash flow point of view to make sure the money is carved off and goes into an investment or super,” she says.
“People are not really good at saving it and putting in a large lump sum at the end of the year.”
Brown says when investing into shares or exchange traded funds, people should be mindful of stockbroker costs. It’s often a better idea to build up at least $1000 before buying an individual stock, as this lowers brokerage costs as a proportion of your outlay.
Perks Private Wealth director Simon Wotherspoon says the “pay yourself first” strategy works by diverting money towards future wealth before you spend it on weekends.
“The superannuation guarantee (compulsory employer payments) is forced savings that people generally don’t realise,” he says.
Wotherspoon says many people are familiar with salary sacrifice into super, but far fewer are aware of rule changes in recent years that allow more people to make personal contributions to super at any time and claim a tax deduction for them.
These are called concessional contributions and people have a $25,000 annual cap that includes employer payments.
Remember that money put into super must generally stay there until retirement. “Make sure you have enough elbow room so you don’t lock up all your money,” Wotherspoon says.
Originally published as Get rich faster with this long-term investment winning strategy