How to Start Investing – An Expert’s Tips for Any Age

It’s currently a tough environment to grow your money in Aotearoa, with term deposit and savings account interest rates not cutting it. For generations, many of us – especially women – have chosen options such as term deposits because they feel safe. However, that perceived safety could be the biggest long-term risk to your financial wellbeing. With inflation stubbornly high, money sitting safely in the bank is losing purchasing power every single day. It can be daunting knowing where to start. The best way forward is to either start at the end – with your goal – or, if you don’t have a goal, simply get started – Ana-Marie Lockyer, CEO at Pie Funds, tells us how to start investing!

What is your goal?
 
When you first start on your investing journey you may not necessarily know what your ultimate goal is – and that’s actually OK. The main decision is to start saving regularly and make it a habit: it doesn’t matter how small, just do something.

Once you’re under way, your goal will likely emerge, and it can often change as we go through different life stages.

A woman in her 20s or 30s who is laser-focused on maximising a house deposit requires a completely different approach than a person in their 40s or 50s focused on boosting their retirement fund, or someone aged 60 and over who is looking to safely set up their family’s financial future. Investing, at its core, is simply the practice of putting your money to work in assets that can grow or generate returns.
 
The ultimate key to managing this risk is diversification. You know the old adage ‘don’t put all your eggs in one basket’ – well, it’s time to live by that. By spreading your money across different assets, sectors, and even countries, you cushion yourself against the possibility of any one option failing, effectively smoothing out your returns, protecting your hard-earned wealth – and most importantly, hitting your savings goals.
 
What’s right for you at what life stage?
 
So, how do you actually balance risk and reward to achieve your goals? As we all know, financial priorities shift massively over the decades, starting in your 20s.

Starting strong

In your 20s and 30s time is your greatest financial superpower: with your career and earning potential ahead of you, you benefit most from the magic of compounding growth. That means your money is making money, and that money is making more money, and so on.

The long runway ahead of you makes this the perfect time to accept a higher level of risk for the highest potential reward – think shares, growth funds, and ETFs (exchange traded funds). Over 30 to 40 years, the inevitable market ups and downs are smoothed out in a growth-oriented fund, and it will almost certainly outperform a lower risk fund which invests in bonds.

For example, an average 25 year old could have almost $300,000 more in their KiwiSaver by the time they retire at 65 if they choose to invest in a growth fund rather than a conservative fund.*

Don’t worry about waiting for a big lump sum to invest – small, regular, automatic contributions are far more powerful because they start compounding immediately.

This stage is also critical for your KiwiSaver strategy: are you saving for your first home or for your retirement? If you’re using KiwiSaver for a first home deposit, you’ll likely need a lower risk fund with stable returns to protect the value of your money.

Building momentum

Your 40s and 50s are likely to be your greatest earning years and where growth should remain your key focus.

The critical mistake many people make here is pulling back too early as they edge closer to retirement. We are generally working and living longer than our parents did and have a longer investment runway. So you still need a strong growth exposure to maximise your savings.

Creating confidence for what’s next

In your 60s and beyond, your strategy needs to evolve. Your portfolio is likely much larger, so a market drop now has a much bigger impact on your savings and investments than it did in your 20s. Your priority becomes shielding your money from big short-term losses and generating a regular cash flow to live on once you stop earning.

But don’t forget, your savings will likely need to last 20-odd years. If you move all your savings into cash as soon as you hit 60 years old, inflation will eat away at your money. Gradually moving into income-generating investments like dividend-paying shares and high-quality bond funds is a wise move. And keep a portion of your portfolio in growth assets to ensure your money keeps pace with inflation and your nest egg lasts for your entire retirement.

Your toolkit for building wealth

There are so many options you can choose beyond the bank. Shares or equities are higher risk but have strong long-term returns. If you want easy accessibility to a broad range of shares, actively or passively managed funds and ETFs give you instant diversification and are less intimidating if you’re a beginner.

As you shift your focus, lower risk assets like bonds and fixed interest become vital for stability. While property is culturally significant in New Zealand, always weigh the high cost, maintenance requirements and the difficulty of selling with the potential returns. Finally, remember the world is your oyster, so it’s worth looking beyond the NZX for global opportunities, like over the ditch in the ASX.

The reality of women’s investment abilities often surpasses our own perception that investing is for an elite club. But it really isn’t – it is your most powerful tool for independence, security, and choice. Build the habit of regular contributions rather than waiting for a lump sum, as saving little and often hugely capitalises on the compound growth potential.  Remember, you will have many goals along the way, but your ultimate long-term goal is to ensure you still have an income to live off when you are no longer earning.

Money sitting safely in the bank offers short-term comfort, but smart investing is how you create long-term freedom. I urge you to review your current money strategy and commit to taking one small step this week to get your money working harder for future you.

Finally, I highly recommend you consider seeking professional financial advice to help guide you on your journey. Everyone is unique and forges their own path through the life stages discussed above. Having a trusted professional to check in with, be a sounding board and keep you accountable for your decisions means you’ll have a much greater chance of achieving your goals.