Building Wealth

What is wealth?

Wealth means different things to different people. Essentially, wealth enables you to achieve your financial goals and be financially "free". Whether this means an investment strategy, early retirement, paying off your mortgage or simply setting up a savings plan, depends on your situation.

If you are thinking about building wealth, an investment strategy, or even if you are simply setting your financial goals, you have already made an important step. Starting this process sooner rather than later may well be one of the most important decisions you will ever make.

Achieving your goals

Whatever your financial goals, Nurses First can help you achieve them. If you are looking to start investing but don't quite know where to start, the best thing may be to simply get an understanding of your finances by creating a budget. Our Budget Planner is the perfect way to get your finances in order.

The next step is to start thinking about a financial plan.

Investment strategies

For most people, building wealth relies on a sound financial plan. A financial plan goes beyond having savings set aside, to investing in growth assets that will provide long term growth, adequate returns and, where possible, taxation benefits along the way. Making this change from saving to investing is vital to your long term success but it is a transition that is often hard to make. Some of the most popular investment options are detailed below.

Borrowing to build wealth

Just as you can borrow to purchase a home or car, you can utilise borrowed funds in your investment strategy.

Borrowing to invest, also known as gearing, helps you accumulate wealth faster by increasing your total investment amount. In essence, you are investing someone else's money in addition to your own. The increased total can provide greater growth and potential tax advantages.

Gearing can be used as a basis for various investment strategies, including purchasing an investment property, purchasing a share portfolio or investing in managed funds.

As with any investment strategy there are risks associated with gearing, and for that reason you should seek professional advice.

Investor Access Account

The Nurses First Investor Access Account has been developed specifically to enable members to access the equity in their home to take advantage of the opportunities gearing presents. The following example demonstrates the power of gearing as opposed to simply saving.

If you borrowed against the equity in your home and invested $50,000 in March 1995, your investment as at January 2002 would amount to $180,270 (or $130,270 if you repaid your initial loan in full).

If you took the equivalent minimum loan repayment above and invested it monthly in a high interest savings account over the same period of time, your investment would have grown to just $27,480.

Assumptions:

Growth rate reflects Colonial First State Imputation Fund with initial amount invested $50,000 borrowed against the equity in your home. (Interest only repayments based on 7%p.a. fixed rate loan are approximately $291 per month) Assumes all dividends/income reinvested. Start date 31/3/95.

High interest savings growth rate assumes $291 invested per month at 4%p.a.

Property

A truly diversified investment portfolio will include property, as it can provide steady returns and capital growth. A well known strategy is to borrow funds or use the equity in an existing property to purchase an investment property. Whilst achieving long term capital growth, it also provides the benefit of ongoing rent, and in some cases, may provide you with taxation benefits. As with any investment strategy there are potential risks, and for this reason you should seek professional advice when considering this option.

A further option for small investors are Property Trusts. There are a large number of Property Trusts which can be invested in through the Australian Stock Exchange. Trusts often offer a diverse range of investment options, including residential property as well as commercial and industrial properties.

Shares

Growing numbers of Australians are investing in the share market. However, despite its popularity, many shareholders are relatively inexperienced and don't truly understand the benefits of prudent share market investment.

While shares can offer superior investment returns in the long term, investors should be conscious of the importance of diversification. This means spreading your money over a range of different investments to help reduce risk.

Importantly, although share investment is a long term strategy, a share portfolio should be regularly reviewed and adjusted where required.

Managed Funds

A Managed Fund pools your money with that of other investors to achieve a greater level of diversification. Investors in a Managed Fund receive 'units' in that fund. The unit price rises and falls in line with the changing value of the fund's assets.

An advantage of a Managed Fund are the investment opportunities that can be achieved which individual investors could not achieve. Furthermore, Managed Funds are managed by experts who research and monitor investment markets daily, which all works towards building your wealth.

Superannuation

If you are working full time then your employer will already be making compulsory contributions to a Superannuation fund. Superannuation may well be the single most important investment strategy in your life and will provide the bulk of funds to support you in retirement.

Visit the Superannuation section of our website for further information