Forget about location, location, location being the key to a good investment outcome. For now, let’s think of the most important ingredient as being regular, regular, regular!

A regular savings plan can turn small amounts of money into a sum that can take you closer to your dreams much faster. All that’s needed is time and discipline.

For example, let’s see what happens to an investment starting with just $100 and adding $100 each week from your regular income. Table 1 shows what the investment value would reach after five years and up to thirty years. In this example, we have assumed that the investment pays a return of 5% per annum (paid quarterly).

Table 1: Regular savings plan of $100 per week compounding monthly.

The results show that a regular savings habit can turn small sacrifices into real outcomes.

To budget or not to budget
Think about what you might have to do in order to save $100 per week to add to your investment. Maybe instead of eating out every week, make it a special monthly event. Taking lunch to work is a big saver – or you could cut back on your coffee purchases if you’re a regular at the local café. Review essentials such as your mobile phone plan and utilities to get better deals and direct that extra cash straight to your investment.

It might sound picky, but in return for this self-restraint you can see what can be achieved:

• the $29,000 in 5 years might go towards a deposit on your first home or an overseas holiday;
• the $67,000 in 10 years might contribute to your young children’s secondary or tertiary education; or
• the extra $258,000 in 25 years might help you to retire more comfortably or earlier than you thought you could.

Any of these goals would seem to make your small sacrifices extremely worthwhile in the long run. And remember to write down your financial goals as early as you can because it’s much easier to make those sacrifices if you know what they are helping you to achieve.

Reducing expenses is not the only way to find a spare $100 each week. Another good time to start a savings plan is when you receive an increase in your disposable income from a new job or a pay rise. Before you spend the extra money, put it away.

The trick is to start soon
Everyone’s ability to save is different. If you can’t save $100 every week, the above figures are still worthy of your attention. For example, if you can save $50 per week simply halve the results in Table 1. Conversely, if your savings capacity is higher, multiply the figures.

The results also demonstrate the effect of time and compounding returns on the value of your investment. The sooner you start, the less you need to save in order to achieve the same outcomes.

The difference 10 years can make!

Esma plans to retire in 20 years from now so she starts saving an extra $100 per week for this goal. Based on our simple calculations she might expect to have an investment of around $178,000 to add to any other superannuation or retirement benefits she has at that time.

Esma’s twin Yusuf also plans to put down the tools in 20 years, but he is confident that he can save more money than his sister. So Yusuf ignores any type of retirement planning for the next 10 years. He then saves twice as much as Esma – $200 per week – for the last 10 years of his working life.

Assuming a 5% return on the investment, the difference is staggering. By starting 10 years earlier, Esma will have saved just over $178,000 compared to Yusuf’s outcome of $134,743.

Even though his regular savings amount totals exactly the same as his sister ($104,000 over the period of the investment), Esma has benefited from the compounding investment returns on her money over a longer period of time, earning an extra $44,000 in interest – or better known as “free money”!

Another way to look at it is that Yusuf would need to save $265 per week for the last 10 years of his working life (a total of $137,800) to end up with the same outcome as Esma.

And finally…
The examples we have used here are aimed at highlighting the benefits of time and discipline when it comes to investing in a regular savings plan. To keep things simple, we have not taken into account other factors that will impact on the outcomes you can achieve, such as taxation, fees and differing investment returns. These factors are nonetheless important and will need to be considered when you are deciding on the type of investment you choose for your regular savings plan.

Higher-return savings accounts, managed share funds and superannuation are just a few ways to implement a regular savings plan like the one we have examined here (although you won’t find any at call bank accounts that pay close to 5% at present!). The type of investment that is best for you will depend on your own specific circumstances, including your goals, timeframes and attitude to risk (volatility).

You can start a compounding savings plan on your own or talk to us – we can show you more options to help you achieve your dreams sooner.

The pandemic continues to upend the financial situations of many and as a result, Australians are turning to new ways to invest and save. But for those that Australia’s big banks don’t cater for, the recent tumultuous years have highlighted a glaring issue: traditional financial services are failing to meet the needs of our growing and increasingly diverse population.

As Australia diversifies so should the services on offer. Australian Muslims, for instance, are a growing market that are traditionally well-educated, hard-working, and great at saving. Yet, a recent study by Hejaz Financial Services found that a significant portion of Australian Muslims are avoiding everyday financial products like savings accounts and insurance because of a lack of suitable options. Of those that are using traditional financial products for investments like a mortgage, almost half (46 percent) are doing so “reluctantly” in the knowledge that income from interest runs contrary to their religious beliefs.

Even more concerning, the research found that over 1 in 3 Australian Muslims keep significant cash savings at home because of a lack of suitable finance options and to avoid earning non-Sharia compliant interest. In a developed country such as Australia, this situation beggars belief. Besides the obvious security risks associated with storing cash savings outside of a secure facility, a decision like this leaves many Australian Muslims at a financial disadvantage, unable to generate wealth or invest for their future.

Ethical financial products take centre stage amidst a growing Australian population

The demand for ethical financial products that align with religious and core beliefs is also growing. Hejaz Financial Services has seen the rise of ethical and impact investing, with more consumers seeking out alternative finance options that align with their personal values and beliefs. Looking forward to 2022, Muslims and non-Muslims will invest with purpose in sustainable companies, industries, and solutions that ‘do no harm’ and have a positive impact.

Sharia-compliant financing is a clear example of these underlying environmental, social, and corporate governance (ESG) principles. To be classed as Sharia compliant, investment in the following business activities is not allowed: conventional banking and insurance, alcohol, pork and all non-Halal food items, gambling, tobacco, adult entertainment, conventional derivatives, weapons, and other impermissible actions as decided by the Sharia Supervisory Board.

Australians want to take ethical finance into their own hands

There is an appetite in the Islamic community for proactive finance management, with 2 in 5 respondents saying they are educating themselves and searching for financial resources. Almost a quarter (23 per cent) are currently seeking help from a professional adviser, while many are turning to family, friends, and colleagues for advice.

As interest in ethical investments and companies with positive ESG credentials rises, alongside living expenses, it is our mission to provide suitable Sharia-compliant financing options. Our ambition is to become Australia’s first Islamic Bank.

If your new year’s resolution is to reduce your social and environmental impact, a great first step is to review your finances. What are you personally investing in? What is your superannuation fund investing in on your behalf? These are important questions with sometimes difficult answers. Hejaz Financial Services’ network of financial experts can assist you in making ethical and sustainable decisions for your financial future today.

The next generation of investors are here and ready to take on the investment world. They are enthusiastic but limited in knowledge. This article provides advice on how to start your investment journey and the costly mistakes that should be avoided.

You’re young, expecting a satisfying future brimming with friends, family and a comfortable lifestyle.

You’re a Next Generation Investor, likely aged between 18 and 25, and you’re starting to think about financial security.

According to an Australian Stock Exchange study, nearly a quarter of all investors over the past two years were Next Generation Investors. Additionally, some 27% of surveyed people under age 25 intend to invest over the next year.

The excitement of embarking on a journey toward financial freedom is common, as is confusion, after all, in the rush of enthusiasm, how can you ensure you get the decisions made for the future, right today? Further, what are investors rookie mistakes to watch out for?

Here are a few that can be easily avoided.

Not clearing debt first

Student loans and credit cards have a knack for eating away income. We’re not saying don’t save at all, but we’re recommending you clear as much debt as possible before committing to serious investments.

Track your spending to spot potential savings, then channel that cash towards your debts. Every little bit helps.

No strategy

Desire to build wealth through investment is not a strategy. Saving for a new car, a home deposit? Perhaps you’re planning to retire in your 40s? The end game determines which investments will be most suitable.

Now, consider how you feel about risk and whether you’ll need access to your money. Successful investment strategies are planned.

If it feels overwhelming, seek professional advice to help you build your strategy. You’ll be surprised at how inexpensive a financial adviser can be.

Not diversifying

Generally speaking, the higher the potential return, the higher the potential risk.

Market-linked investments, like shares, can be big-earners, but you’ll have to ride economic ups-and-downs to get there – sometimes for ten years or more.

If this worries you, consider lower-risk investments. Conservative in nature, their returns are generally lower, but you’ll probably sleep better.

Decide how much risk you’re comfortable with. You may be better off minimising exposure to high-risk assets by diversifying your portfolio with a variety of investment types.

Trying to predict the market

Investment markets are notoriously unpredictable; even experienced traders sometimes get their timing wrong. Buying shares at the wrong time can mean you pay more than you should, similarly selling at the wrong time can result in losses.

Short-term buying and selling might seem exciting, but it’s a fast-track to losing money. The way around this, as previously mentioned, is research, diversification and being prepared to stay the distance.

The magic word is patience.

Review

No investment is a set-and-forget scheme. Always keep track of your savings and your ongoing investment plan, ensuring that it continues to align with your goals, particularly as they change over time.

A flash car may be your priority today, but fast-forward a couple of years and perhaps marriage and children are your priorities.

As your goals change, so must your investment strategy.

A few other things…

Fees and taxes are unavoidable and various investments attract different expenses and tax structures. Find out what you’re up for before making financial decisions.

Feeling lost? The Australian Stock Exchange offers free online courses and the Government’s MoneySmart website has a free info Starter Pack to get you underway.

Of course, nothing beats professional advice tailored to your needs. Be sure to seek specialist advice from your accountant or financial adviser.

Strategic investing sets you up financially, and helps create a savings habit for life. Your financial future begins today.

Visit https://www.hejazfs.com.au/investments/ to learn more about our Islamic investment options or give us a call at 1300 043 529 to talk to our financial adviser about what best suits your situation. Our financial advisers can help you understand your risk comfort level and design an investment strategy that is right for you.

These are the 9 golden rules of investing to hold on to despite market conditions. While markets are performing well it is easy to sit back and watch investments rise in value. However, it is a different story when markets are not performing so well and uncertainty abounds. Holding your nerve is not easy. So how do experienced investors handle this? Here are 9 tips:

1. Recognise the cycle

Financial cycle are all prone to move in cycles. Sometimes the throughs feel like they will last forever but they do eventually end and move on to higher levels.

2. Diversify

Diversifying is one of the most important rules for successful investing. By diversify across asset classes, markets, geographical regions, managers or companies, your risk is effectively spread out. This might minimise your potential losses and smooth out your investment returns over the longer term.

3. Avoid crowds

The worst time to invest is when everyone else is rushing in. Become a contrarian investor whilst still applying fundamental quality tests.

4. Buy and hold

Buy quality investments and hold them – at least until they have had time to achieve their expected return. Very few investors make money through speculating.

5. This time is not different

When the market goes dramatically up or down there is a tendency to cry “this time it is different.” This time is definitely not different.

6. Do not be swayed by high returns

Do not chase last years winners instead, look for this year’s opportunities.

7. Invest regularly

Implement a disciplined savings plan often referred to as “Dollar Cost Averaging” – a little bit often can build up to a lot.

8. Consider tax implications

If you are a wealth builder, seek capital gains in preference to income. If you need income, investigate different structures that help to minimise tax.

9. Have a regular check up

Review your investments and strategy on a regular basis. Work with a professional financial adviser who will help you achieve your goals.

You can also consider investing in a Halal managed fund where experienced portfolio managers will help you manage your investments. At Hejaz, our investments are actively managed to ensure that your investments are compliant and performing. Unlike others, we have an inhouse Islamic investment team we do not outsource this critical function, setting the management of your wealth as our priority.

Visit https://www.hejazfs.com.au/investments/ to learn more about our Islamic investment options or give us a call at 1300 043 529 to talk to our financial adviser about what best suits your situation. Our financial advisers can help you understand your risk comfort level and design an investment strategy that is right for you.

Managing your investment risk

There is hardly anything in life that doesn’t involve taking some risk – even getting out of bed in the morning! Many people are fearful of investing because all they focus on is the risk of losing their hard-earned money. Others look for great returns and forget about the risk entirely. As with anything, there has to be a balance.

In the majority of investment structures, risk and return are related. The more risk you take, the more return you can potentially make (and vice versa). But there are ways in which this “risk” can be managed without defaulting to low-return investments.

Here is a handy checklist to keep you focused on maintaining a balance and to minimise your investment risk.

1. Risk and return

To get ahead, your investment returns needs to take account of tax and also stay ahead of inflation. Many low-risk investments such as bank savings accounts often do not achieve that goal. To make any gains, you must take calculated risks.

2. Learn more and be aware

Many investment disappointments come from lack of knowledge. Learn how things work. The more you understand about investing and financial markets, the better you will become at choosing the right investments for you.

You will also be less likely to act blindly on a tip from a family member or friend, without first doing your own research. You must ask questions until you understand the investment. If you do not understand it, do not invest in it.

3. Rely on experience

Software and mathematical models can increase understanding but in the end it is people who make the difference. Smart investors seek the help of experts.

4. Never assume

It is easy to make assumptions and accept the information you are given. You must test the assumptions through questioning.

5. Understand the risks

It can be tempting to pretend that a risk is small if something sounds really good. You must accept that risk always exists. Discuss it openly with your adviser so it can be managed. Think about your goals, how soon you want to access your money and your risk appetite will help you make a decision on which investments are right for you.

6. Mix up your investments

Avoid putting everything you have got into one investment. Spreading your money across different types of investments may protect you from sudden market falls and deliver more consistent returns over time. The larger number of small and different investment risks you take can provide a higher probability of more consistent returns.

7. Stay focused

Be consistent and think long term. A rigorous and systematic approach will beat a constantly changing strategy every time. While there are exceptions, fluctuations in the value of your investments they should even out over time. So the longer you stay invested, the less investment risk you are exposed to.

8. Use common sense

Investing requires you to make judgements rather than following a script. It is better to be approximately right than to be precisely wrong.

9. It is not just about returns

It is all about risk and return. Accepting and managing the risk may help you realise the return you desire.

Just like achieving other goals in life, you need to decide how much risk you are prepared to take in chasing higher rewards. If the risk is just too much to bear, you can consider putting your money in one of our premier Halal managed funds where a team of experienced Islamic portfolio managers will help you manage your investments.

Visit https://www.hejazfs.com.au/investments/ to learn more about our Islamic investment options or give us a call at 1300 043 529 to talk to our licensed financial adviser about what best suits your situation. Our financial advisers can help you understand your risk comfort level, and design an investment strategy that’s right for you.

Investing in shares

Investing in the sharemarket provides a way of participating in the future profits and growth of Australian and international businesses. In Australia, there are more than 2,000 companies listed on the stock exchange, representing a market capitalisation of $1.69 trillion*.

Risk/return characteristics

Shares are generally considered a high-risk and high-return investment and are suitable for longer-term investors.

Historically, Australian shares have provided long-term growth well above inflation. However, shorter-term sharemarket returns have experienced higher volatility at times.

Sharemarket investors may expect a negative return approximately once in every five years or so, which is why shares are suited to longer term investors. Time greatly reduces, but does not eliminate, the volatility in returns from shares.

Sharemarkets move in cycles, reflecting the underlying strength of the economy, political factors, industry trends and market sentiment. On any given day interest rate and inflation expectations, company profits, dividends, economic growth figures and the rise or fall of our dollar may have an impact on share prices.

Income and capital growth

While shares are primarily a growth asset, they may also provide a good source of income.

Most companies distribute a proportion of their profits in the form of dividends. Companies that pay high dividends tend to be blue chip companies like those in the banking, insurance and retail sectors. Some companies, like those in the mining sector or newer industries like biotechnology, may retain dividends to fund future research, expansion or exploration.

Actual yields may change dramatically from year to year and vary from company to company. If company profits are not growing, dividends are likely to be stable and if profits fall, a company may have to reduce dividends.

Tax benefits

Dividend imputation is the main reason Australian shares are so tax effective. Given companies have already paid tax at the company tax rate, investors can use franking credits to offset the amount of tax they pay on dividends and have any excess credits refunded. The higher the franking level the greater the benefit.

Some companies pay fully franked dividends, with the maximum imputation credit of 30 per cent (equal to the company tax rate). Other companies pay partially franked dividends where the imputation credit will vary depending on the amount of tax they have paid on their profits.

Implementing your portfolio

You can invest in the sharemarket directly or through a managed fund. One of the major benefits of a managed fund is that you can access a much wider range of investments than you can investing directly yourself. Another is that your assets are professionally managed.

Index-tracking traditional index funds and Exchange Traded Funds (ETFs) invest in all or a representation of stocks in a selected index with the aim of producing index returns, before fees. By contrast, many active Australian share funds hold between 30 and 70 stocks, out of a universe of around 200 to 300 securities depending on the index used.

*Australian Securities Exchange. End-of-month valuation, July 2015.

At Hejaz Financial Services, our investment products are build and managed by expert teams with years of experience and deep, human understanding of markets. Learn more about our Premier Islamic Financial Services here.

Getting started with investing

There are many different ways to invest and the solution you choose will depend on your individual situation: how much you are investing, the degree of access you need to your money and what your financial goals are, both professionally and personally. It’s also important to get clear on the level of risk and return you want to be exposed to.

Diversification

All investments involve risks. Diversification is a way of managing the risks associated with investing. It involves spreading your money across different asset classes and investments, so as to limit the impact of negative events on any one asset class or investment. Diversifying across asset classes protects you against underperformance in any one asset class. Your asset allocation will reflect how cautious or aggressive your investment strategy is.

Can you comfortably watch your balance go up and down?

Some people find it easy to stay relaxed while their investments rise and fall in value. Others feel nervous if their assets drop in value by even the tiniest amount.

If you’re going to lie awake at night worrying, it’s not likely to be worth the personal cost, no matter how high the returns you might make.

Talking to someone about your ability to cope with financial stress can help you decide how you feel about taking on investment risk, even if it’s just a member of your family or a friend whose opinion you respect.

A professional financial planner should also be able to help guide you through some different options and outline the different levels of risk involved.

How to reduce your risk

No matter what your temperament, exposing your hard-earned savings to any kind of risk will always be a bit scary – especially if you’re doing it for the first time.

Some simple strategies to reduce risk that even the professionals still follow include:

• Think long-term: While there are exceptions, fluctuations in the value of your investments should even out over time, so the longer you stay invested, the less investment risk you are exposed to.
• Choose the right investment for you: Thinking about your goals, how soon you want to access your money and how likely you are to worry will help you decide which investments are right for you.
• Try to avoid putting everything you’ve got into one investment: Spreading your money across different types of investments may protect you from sudden market falls and deliver more consistent returns over time.
• Learn how things work: The more you understand about investing and financial markets, the better you’ll become at choosing the right investments for you. You’ll also be less likely to act blindly on a tip you might hear from a family member or friend, without first doing your own research.

Getting started with investing may be daunting, but that’s no reason to delay putting the various markets to work. Our financial advisers can help you understand your risk comfort level, and design an investment strategy that’s right for you.

At Hejaz Financial Services, our investment products are build and managed by expert teams with years of experience and deep, human understanding of markets. Learn more about our Premier Islamic Financial Services here.