Liz Koh: Start early and reap financial benefits

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Starting a portfolio at a young age is smart business sense.
Starting a portfolio at a young age is smart business sense.

Starting an investment portfolio is usually somewhere near the bottom of a priority list for young people entering paid employment. At that stage of life they just want to have a good time.

Of course, many employees are now members of KiwiSaver, which makes them investors, at least to the extent of 3 per cent of their pay. For those who want to enjoy an above-average lifestyle during their working lives and retirement, KiwiSaver is essential but will not be enough. Although it is good to invest sooner rather than later to take advantage of the benefits of compound returns, investment beyond KiwiSaver is something that should take a back seat until you have a solid financial foundation to build on.

Once you have surplus funds, getting rid of short-term debt is the top priority. There is unlikely to be an investment that will provide a guaranteed rate of return higher than the interest you pay on short-term debt. The next priority is to have funds in reserve for when life doesn't go according to plan, either in a savings account, or through a relatively low interest line of credit.

Buying a home to either live in or rent to someone will help add to your financial foundation. Whether you start investing while you still have a mortgage will depend on a number of factors.

Strictly speaking, it is best to put every spare dollar towards your mortgage and begin investing once it is paid off. However, not everyone has the discipline required for this approach.

Getting into the habit of investing earlier in life is a good idea.

Borrowing money to invest in property or a business can produce better returns than paying off the mortgage on your home providing your financial foundation is solid.

Liz Koh is an authorised financial adviser. The advice given here is general and does not constitute specific advice to any person. A disclosure statement can be obtained free of charge by calling 0800 273 847. For free ebooks, see and

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