How to start investing (for beginners)
Louis: So we were waiting for our nachos to come, and then he starts talking about capital gains. I know! I just had to fake a family emergency and just get myself out of there. I've never invested anything in my life. I'm embarrassed. How am I meant to know this stuff?
Liana: It's actually okay not to know this stuff. It takes time and a few lessons from people who have gone through it already. Liana, you are just the person I needed in this very moment.
Louis: Sorry. I found an expert. ANZ presents: How To Start Investing For Beginners. It's okay. I didn't know either. Okay. So I had this really awkward date last night with this regular “Wolf of Wall Street” kind of guy. And it just made me realise I know nothing about investing. Can you please help me upskill in a few things?
Liana: Yeah, absolutely. So what kind of investments are we talking about here?
Louis: Uh, yeah, that's kind of the most pressing question. I don't even really know where to start. I don't think I've invested in anything except myself.
Liana: Well, technically that's not true, most Australians are investing in a superannuation fund as soon as they start working without even knowing it.
Louis: So I'm an investor. Well, when should I start investing in other things?
Liana: Blazer looks fabulous.
Louis: Thank you. I’m an investor.
Liana: Well, if you have a bit of extra income or a goal you really want to work towards, then I would say the sooner the better.
Louis: Liana. This is really good stuff. Actually, I should write this down, I'm really feeling this CEO energy. What are my options?
Liana: You can invest directly in things like property, shares, cash or bonds. All of these involve investing in assets either on your own or via a broker or investment platform. Each comes with different risk levels, fees and charges. So it's really good to do some research or maybe even talk to a banker or an independent advisor about it. On the other hand, you could look at indirectly investing through a managed fund or an ETF, and that's where your money is pooled together with other investors and investment decisions are sort of taken out of your hands and managed by somebody else. It's a great way to get exposed to different markets and invest in asset classes you might not have direct access to on your own.
Louis: How much do I need to get started though?
Liana: It really depends on the investment type. So if you'd like to invest in shares, you could start with as little as $500. If you'd like to invest in managed funds and have someone else make those decisions for you, you might need a little bit more just to factor in brokerage and fees and getting someone else to set it up for you.
Louis: Wait before you go, capital gains. What's going on?
Liana: So capital gains - put simply - if you invest a dollar today and in 12 months time it's worth $2, the capital gain is $1.
Liana: Where it can get a little bit more complicated is when we start talking about capital gains tax. I know, I know. It's frightening. So if you sell your investment within a year of buying it, any capital gains you made are taxed in full as normal income. But if you wait and your investment has been invested longer than a year when you sell it, you only get taxed half of your capital gains. So it's an incentive to hold onto your investments for longer than a year.
Louis: Okay, I think I'm ready for my second date now.
Liana: I'll leave you with this. The most important thing is to set clear goals so then you can make decisions that will help you get there. Short term, that could be a holiday backpacking around Europe. Long term, it could be a house deposit. If you know what you want to achieve, it's easy to cut back on spending now, so you reach your goals later.
Louis: So it's all about knowing what I want?
Louis: Actually, ironically, that's kind of good dating advice as well. If you found this video helpful, subscribe to our channel and watch me as I upskill in a whole lot of other financial wellbeing topics. Also click the links in the description for some more handy resources. Yeah. Gavin, I think I'm ready for our second date and I really want to talk about capital gains. I love you.
Liana: It's... second date.
Louis: I think...I think there's just bad reception on his end. He'll call back.
Liana: Yeah. Yeah! He will totally. How could he not?