In today’s fast-moving financial world, with market updates, interest rate shifts, and evolving economic forecasts, it’s easy to feel overwhelmed – but with the right guidance, you can turn insight into confident, proactive decisions.
Taking action is key to building long-term wealth. Making informed investment decisions, contributing regularly, and staying engaged with your finances can help your money grow, allowing you to continue navigating towards your future goals.
Protect your wealth against inflation
One often overlooked factor is inflation. While your money may feel secure in a savings account or term deposit, taking proactive steps can help it grow and maintain its purchasing power over time.
Even in low-inflation environments, the real return on cash is often negative once you factor in tax and inflation.
The ‘cost’ of cash
Holding too much cash for too long can be a drag on your portfolio’s performance. While cash plays an important role, it’s not designed for long-term growth.
Consider this:
- Over the past 30 years, Australian shares have returned an average of 9.3% per year, while cash has returned 4.1% annually.
- That difference compounds significantly over time. Based on those rates, $100,000 invested in shares could grow to approximately $1.4 million in 30 years, while the same amount in cash might only reach around $330,000.
Keeping money in cash can mean missing out on the growth opportunities offered by other investments.
Don’t let ‘set and forget’ limit your growth opportunities
Many investors start out with good intentions. They set up a portfolio, make an initial contribution and then leave it untouched for years.
While long-term investing is a sound strategy, staying actively involved with your portfolio helps you to capture growth, adjust to market changes and make the most of your opportunities.
Here’s what you need to be aware of:
- Asset allocation changes: Market movements over time can shift your portfolio’s balance, altering its intended risk and return profile.
- Dividends: If dividends are paid out and not reinvested, you lose the benefit of the compounding effect.
- Changing goals: Your financial needs are likely to change as you age, but your portfolio won’t reflect that unless it’s reviewed.
Annual check-ups can help ensure your investments are still working for you.
Missed opportunities
Compound interest is one of the most powerful tools in wealth creation. However, compounding works best if you’re consistently contributing and reinvesting.
Consider two hypothetical investors who both invest $10,000, earning an average 7% per annum:
- Investor A contributes an extra $5,000 each year
- Investor B contributes nothing after the initial $10,000 investment
After 30 years (and not accounting for fees and other costs):
- Investor A may end up with more than $500,000
- Investor B may end up with around $76,000
The real difference comes from making regular contributions over time and harnessing the power of compounding.
You can do your own calculations with ASIC’s MoneySmart calculator.
From passive wealth to active growth
For high-net-worth investors, taking action can make a significant difference. By strategically deploying capital and making timely investment decisions, even large sums can work harder, unlocking substantial growth potential over time. When large assets are involved, proactive investing can turn opportunities into millions of dollars in long-term growth over time.
While capital preservation is important, so is capital productivity. Allocating funds across diversified asset classes can help balance risk while enhancing long-term returns.
Staying inactive, particularly during market uncertainty, may seem safe, but it can leave capital dormant – failing to grow, keep pace with inflation or support your evolving financial goals.
Your financial plan should evolve with you. A portfolio designed five years ago may no longer align with your current goals, risk tolerance or tax situation. Life changes – such as marriage, having children, career shifts and retirement planning – and your investments should reflect these changes.
Next steps
Taking control of your finances empowers you to grow your wealth and unlock your true potential. Even small, consistent steps – like regular contributions, reinvesting earnings, and reviewing your plan can have a big impact over time.
Speak with your local Nexia Adviser to create a tailored strategy that helps your money work harder and supports a confident, secure financial future.
