After turning 50, one question loomed in Karen’s mind: “Will I ever have enough money to retire?”
Sydney’s busy mother had always been diligent in managing her finances and her mortgage through spreadsheets. But after paying “non-negotiable” bills, food, gas and private school tuition, there was little left to save.
‘For years I thought my husband and I would need to work forever to earn an income. I was quite pragmatic about it and felt there wasn’t much I could do to change things,” Karen, now 70, told FEMAIL.
“I tried not to stress too much about the fact that I might have to work full time until I’m 90.”
A few years later, the terrible situation began to improve. Their children grew up and moved away, leaving Karen and her husband with more money to “play,” so they decided to start thinking seriously about retirement.
He had dabbled in the stock market as a young man in the 1980s, when he invested around $3,000 in three or four companies, but he didn’t really understand what he was investing in or why, so he failed to make any significant returns. .
After finally paying off the mortgage on the family home, Karen decided to get serious about investing during the pandemic and signed up for a Mastering Money course with SkilledSmart, all about managing finances and investing wisely.
Four years later, she is comfortably retired with an impressive investment portfolio worth $200,000 with CommSec, plus $500,000 in retirement.
Karen (pictured) from Sydney used to worry that she would never have enough money to retire. During the pandemic he took matters into his own hands and learned to invest
Growing up, Karen lacked what we now call financial literacy and had “no idea” how to start investing, so she had to teach herself.
It wasn’t until he was well into his 60s that he started reading investment books and magazines, which pointed him in the right direction. At first there was an element of “trial and error” but, over time, his confidence grew.
Today, she sees income flowing in from her various investments in the Australian share market, which has made her feel “more positive and confident about the future.”
He uses CommSec and has found it to be one of the best options with the cheapest brokerage fees.
“Back then, I used to work with a real stockbroker, which was the common practice before online brokers,” Karen said.
After just four years, she is comfortably retired with an impressive investment portfolio worth $200,000, plus $500,000 in retirement.
What does Karen invest in?
Karen’s portfolio is primarily made up of Australian stocks spanning seven to nine industries, with a greater focus on the financial sector and consumer industries.
Invest in both ETFs (exchange-traded funds or a “basket” of multiple companies) and direct stocks.
“I don’t have a strict allocation to stick to, but I do pay attention to the balance between different industries, so if the portfolio starts to lean heavily towards one sector, I might try to balance it out,” Karen said.
“For example, right now my investments in the financial sector represent a much larger percentage of the portfolio than is perhaps ideal, so I may consider investing in other sectors to start to balance that out a little by buying more in other sectors” .
In terms of how often she invests, the retiree doesn’t try to “buy the dips” or “time the market,” but instead focuses on the time she spends in the market.
You only make a handful of trades each year (estimating around half a dozen) and make your decision based on the income the stock can provide you.
“On occasion, if I feel it’s necessary, I might sell it,” Karen said.
“I tend not to time the market, I look at the overall package, the most important thing is to buy a good quality investment.”
Karen said she is always paying attention to how much she has in each sector and tries to keep her portfolio from tilting in a particular direction. However, he adds that this is not a “strict rule” but rather a “guiding principle.”
‘I like to focus on one industry at a time and determine what specific investments I would like to make in that industry. In recent years I have become more interested in investments that provide good dividends,” he explained.
“While that’s certainly not the deciding factor, it’s something I think I value more now, given my stage of life where having that extra income stream is helpful.”
Real estate is often considered the golden ticket to a financially secure retirement for baby boomers, but Karen has taken on a different role. Instead of buying an investment property, he focused on the share market (file image)
Karen once owned an investment property in her 20s, but sold it shortly after getting married and later bought a family home with her husband.
Since then he has not invested in real estate again, simply because of the necessary capital, which he did not have.
‘Real estate requires much more money up front, while shares can be purchased with much smaller amounts of money, making it more accessible. It’s also easier than investing in real estate, so it was easier for me to get into stock market investing,” he said.
You have never considered investing in cryptocurrencies, which are popular with younger investors, because of how complex and confusing it can be.
How does Karen manage risk?
Karen said the most important aspect when it comes to investing and managing risk is to continue learning and educating yourself.
‘Over time, you improve. You don’t guess, you make informed decisions and you improve every time. I don’t think you’re too old to learn something new. “That helps you develop the skills and knowledge to make better decisions, which helps you minimize and avoid mistakes,” he said.
Karen also makes sure to diversify her portfolio by “not having all her eggs in one basket,” a popular strategy. This minimizes the risk if a sector loses value or, in the worst case, if a company closes permanently.
Another way to manage risk is to look beyond your investments and focus on the rest of your finances and cash flow management.
‘Over the years, I have tried to be diligent in tracking expenses. At one point we had debts and for me it was a priority to pay them. This meant I could keep my investments invested and growing without having to sell urgently or due to an emergency,” he said.
The only thing he regrets is not having started sooner. “If I had understood when I was 20 what I know now about investing, I would have been in a much better position today,” Karen said.
The only thing he regrets is not having started sooner.
“If I had understood when I was 20 what I know now about investing, I would have been in a much better position today,” Karen said.
‘But it’s never too late to learn. I’m grateful to have taken the leap, even later in life, because it has given me a sense of security and peace of mind.’
KAREN’S THREE RULES OF GOLD MONEY
1. Start as soon as you can
Karen’s main advice to others is to simply start, regardless of your age, but the sooner you start, the better off you will be.
‘I wish I had started years earlier, but I had no guidance. “No one in my family knew,” he said.
‘I came to this later in life. The sooner you start, the better and over time you will become more disciplined with your money.’
2. Be actively interested, don’t leave it to your husband.
Karen hopes that women will be inspired to take the lead with their finances instead of letting their husbands do all the work.
“I think a lot of women in particular think it’s too difficult, but it’s important to be interested,” she said.
‘Even if your partner is the one managing the finances now, you never know what could happen to your partner or what the future may hold. It takes some time and willingness to learn.
‘It may seem like a slow and gradual process, but over time you gain confidence. You can do it at any age; It’s never too late to learn. “I hope my story inspires others to see that.”
3. Expose yourself to financial content
When investing, it is important to stay up to date with financial news and how companies track it to help make a decision about where to allocate your funds.
Doing so will also help you understand different terminology.
“Over time, you start to piece together the different financial terms and concepts, and that starts to shape your thinking,” Karen said.
“Then it will be easier to make better decisions because you are less influenced by all the noise and you have more confidence and clarity in your own decision-making and knowledge.”