Wealth Creation
Wealth creation strategies
Build wealth with managed investments
The difference between 'saving' and 'investing' is really about one thing: how hard is your money working for you?
To drive your money further, you need to invest in growth assets, such as shares and property. These assets have provided better long-term returns and, when used wisely, can save you tax.
Compound returns: The essential ingredient
The driving force behind every successful investment is compound interest (returns). That is, earning interest upon interest.
For example, if you invested $1,000 at 10% per year, at the end of the first year you would receive interest of $100. If you reinvest this interest, at the end of the second year, you would earn interest on $1,100, being $110 so your total value would now be $1,210. Each year you're earning interest on your original capital and your accumulated returns. The longer you hold your investment, the greater the impact of compound returns.
Building wealth the easy way
How does the strategy work?
For compound interest to work its magic, you need to do 2 things:
( 1 ) Reinvest your investment returns, rather than receiving this as cash and spending it. Investment returns can include dividends and interest. This can be done automatically via a dividend, interest or income reinvestment scheme.
( 2 ) Give your investment time to grow by starting your investment as soon as you can and keeping it going for as long as you can.
You can more than double your money simply by investing 10 years earlier.
Tips and traps
Start your investment plan at an early age to take advantage of lower financial and family commitments.
- Increase your regular investments as your disposable income rises.
- It's a good idea to review your financial plan at least yearly.
- Income distributions paid by unit trusts are taxable in the hands of the investor, even if the income is reinvested to buy more units.
The information on this site is general information only and does not take into account the investment objectives, financial situation and particular needs of any particular person. Before making any investment decisions (including any decisions made on the basis of this information) you need to consider, or seek advice on, whether the information is appropriate in light of your particular investment needs, objectives and financial circumstances
