Start investing for beginner

Investing is a tricky decision to some people but also investing is a centain gain decision for ome other people. Just like Robert T Kiyosaki said that investing isn't risky but the risky one is an investor who invest in something that he doesn't know.
So let we start the beginner investing guide as news.com.au as reference.

• Understand the need to invest

PUTTING money in the bank is lending out your money for a fixed return. It’s safe but you only get your money back – and inflation undermines the purchasing power.

The value of a dollar has halved in the last 20 years. So you need money to grow to keep up – that’s investing, putting your money to work.

Unlike gambling it works out over the long term - in the last 100 years, the Austalian sharemarket has returned about 7.5 per cent after inflation, compared to 1.4 per cent from bonds (fixed rate of interest).

• Where to make money

The four major assets classes - cash, property, fixed interest and shares - have different positives and negatives that suit different investors.

Cash can be immediately available for an emergency, unlike property which is clumsy to sell but can carry tax concessions.

Fixed term interest ensures returns in a sharemarket downturn, while shares in companies that pay regular dividends suit retirees wanting an income. Other shares plough back their profits for research or building the business, with the payoff coming later at sale with an increasing share price, which suits younger investors saving up for retirement.

• The power of time

Investment is a process of getting rich slowly. So the earlier you start, the better because the gains compound - Commonwealth Bank Shares have grown over 20 years from $2.50 to $50.

The ride can be tricky on the way, with sharemarkets and property prices going up and down, not always at the same time, so a balanced approach diversified across these major asset classes can smooth returns for new investors. And investors can also balance short term goals (saving for home deposit) and long term goals (retirement) with an investment plan.

• Develop your risk appetite

You can’t avoid risk – even if you leave your money in the bank it loses value over time from the rising cost of living. The higher the reward, the higher the risk.

Risk is about losing money – or not earning as much as you expected, so it’s important for investors to identify where’s the risk.

People differ in their appetite for risk. Time horizons are relevant - shares and property are riskier than fixed interest in the short term, but do better in the long term. Timing investment markets is important – oddly investors do not rush in and buy when prices crash and shares or property are on sale. Puzzlingly, they tend to buy when prices rise, for fear they will miss out.

• Take the first step

Novice investors with as little as $1000 to spend can make start with a managed investment fund. They pool small investors’ money and use professional investors to pick the best prospects from the major asset classes, sharing the profits each year.

The funds are designed at various risk levels, from conservative to balanced to growth to aggressive. Investment companies listed on the stock exchange are also professionally managed, and can have low fees and more tax flexibility.

Similarly property funds or shares in listed property trusts or in homebuilders/managers such as Australand or Mirvac are an alternative to investing directly in an investment property.

Alternatively, investors could buy a packaged model portfolio of diversified blue chip shares through a discount stockbroker, or a portfolio of stocks in an individual managed account through a professional such as DirectPortfolio.

Starting a long term relationship with a stockbroker is another good step on the road to becoming a successful investor.