By Pauline Gordon, ASA Member, first published in Equity, June 2018
In 2000 my husband and I retired and put our savings into a Self Managed Super Fund because it presented a tax effective way to preserve or grow our capital, not because we knew anything about managing funds. It is true to say that I was not interested in managing our finances and left all the decision making to my alpha male. He spent much time educating himself and reading about what companies did and did not do to benefit shareholders.
My husband had a heart attack in 2012. He said, “When I fall off the perch you will be responsible for all of this so you had better become informed”.
ASA turned up in Toowoomba at this most opportune time. We joined and discovered that there was an enormous amount of educational material available. Attending a whole-day ASA Seminar on analysis of Financial Statements presented by Geoff Sherwin gave me a good kickstart.
In 2010 I had joined the U3A Toowoomba group, Investor Forum. At first my brain was one step behind. By the time I navigated through the jargon, the presenter (usually a male), was already on to the next idea. I was surprised to find that many other women experienced the same difficulties. However we were there to learn how to successfully invest our funds. I challenged myself to gain an understanding of the language and process of investing, and perhaps be able to assist others.
Those with funds to invest are encouraged to consult a ‘financial adviser’. You must be able to understand the conversation and the advice that is offered, as one can so easily become bamboozled by the jargon. You need also to be able to determine if the advice is sound and in your best interests. Just remember it is your hard earned cash and you are ultimately responsible for decisions made. Can you afford not to get your head around it all?
I developed a course titled ‘Introduction to Investing’ at the request of U3A Toowoomba, as there was an identified need in our membership group. The course presented basic terminology and the process of investing. Participants included older women, recently retired younger men, and others who just wanted to enhance their investing journey. It was successful in that most participants attended for the whole year and declared they were better informed.
You may not aspire to become a trader or even a direct investor, but you do need to be comfortable when having a conversation with a financial advisor/broker/bank manager/accountant/solicitor or your family so that you can make informed decisions about your financial future. You need to know what options are open to you if you are suddenly left in charge of your super and savings.
What's involved in learning to invest?
Why invest? Clarify why you are interested in investing and how your investment journey is unique to you. Understand that others may take a different path to the same point i.e. predominantly preserving capital and returning some income. Invest in what you know and understand.
What investment vehicles are available to ‘mum and dad’ investors? Property, equities (shares) and bonds (debt securities). For the purpose of looking at the language our course focused on the share market and investing in equities.
You must learn how the stock market works and how and why companies are floated. Find out the responsibilities of the companies, the market and you as an investor. The ASX website has a great amount of free educational material including tutorials and video clips. Their ‘Getting into Shares’ document is a fabulous resource.
Before you work out what to buy and sell you need to know how the process works, what service is offered by a broker (online or fee for service) and the importance of keeping accurate records (i.e. for taxation purposes).
Whilst an investor does not need to be an expert in fundamental analysis, you do need to understand the basics when assessing the financial health of a company.
What is your risk appetite? Risk management is essential and you take control with your Investment Plan. Bill Dodd’s video series on the ASA website is a great resource to help you here. ASA is an association set up to educate, and advocate for investors in equities (shares listed on the ASX).
The hard part is deciding which of the 2200+ companies on the ASX are companies you would trust to increase your money. Know your risk tolerance. Recognise speculative investments. There are strategies to help make decisions on when to buy and when to sell. Successful investing in the present economic climate is not necessarily “buy and hold”; you need to regularly monitor your investments. Remember, you are the one who is ultimately responsible for your cash.
Where can information be sourced? The media/company websites/ASX website/ASA website. There are online analysis services available on subscription, the cost of which varies considerably. You can usually sign up for a short term free trial to judge how useful it could be to you and if it represents value for money.
Learn the language. If you are to become comfortable with the investing process it is important to understand the terminology.