Want to create an investment plan but just don’t know where to start? Or are you worried that you need a large investment amount to get started? Well luckily for you, we have you covered with this 101-crash course to understand what you need to start investing!

Before you start

Prior to beginning your investment journey, it's important to recognise that there is always a risk that things don’t go according to plan. The investments you make may not increase in value, nor may they provide a return through dividends or other income. Past performance is no guarantee of future performance.

With this in mind, it is important to work out what you are trying to achieve and the timeframe you are investing over while understanding that higher potential returns often entail higher risks. Are you planning to trade quickly and make a quick profit? Or are you planning ahead – all the way to retirement? A short investment timeframe will make some investments that don’t trade as quickly, such as direct purchases of property, less appealing.

What are your options?

There is a plethora of assets to invest in – and a few ways to invest in them. Popular investments in Australia include:

· Buying shares – you can own part of a company and earn dividends from that company’s profits, as well as changes to the share price. You can invest in shares from all across the globe with small amounts of money and an internet connection! Shares can be purchased through share trading platforms and you can even invest through your superannuation fund.

· Investing in funds, or indices – such as a managed fund, or an exchange traded fund (ETF). This is when you invest with a specialised manager, or an ‘index’, that allows you to invest in a broader range of assets. These funds and ETFs operate by pooling together money from multiple investors to give you exposure to a diverse portfolio of assets. Through these options, you can invest in themes such as sustainability, infrastructure or geographic-specific funds that provide exposure to these areas.

· Property – such as purchasing an investment property which you can rent out or investing in ‘fractional’ properties. Because owning property requires such a large amount upfront, fractional property investment options give you the opportunity to invest with a smaller amount of money by pooling together funds from multiple investors, similar to fund managers.

Spreading your investments

Diversification is a common strategy used to reduce the risk of putting ‘all your eggs in one basket’. The uncertainty of price changes in a single asset will prompt many to seek diversification across multiple investments which have little correlation, so it makes it less likely that all of your investments will significantly fall in value at the same time.

It's important to consider investment portfolio diversification as this can help with mitigating risk. It may require elements from several different asset types, such as property, fixed interest funds and shares.

Think about costs

Costs are another consideration, particularly when starting out with a small investment amount. Consider the following before you start investing:

· When it comes to shares, for every transaction that you make you will likely pay a brokerage fee. This can be as little as a few dollars, but it can eat into your profits if you are using an expensive share trading platform or make trades frequently.

· For managed funds, you are likely to be paying a management fee.

· With real estate, a management fee is payable to a real estate agent for managing rentals, but stamp duty may require tens of thousands of dollars to be paid when buying property.

· Capital gains tax (CGT) is tax payable on the gains you make from your investments. CGT has the potential to have a considerable influence on the eventual profits of your investments. The Tax Office provides incentives for investors to hold onto assets for longer than one year, as it may reduce your CGT bill by 50%.

· It’s also good to note that when figuring out your real return, you need to consider that inflation will depreciate part of the value of money you earn.