12 smart investment options in Australia

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12 SMART INVESTMENT OPTIONS IN AUSTRALIA
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Theres more to investing than super and
property. Take a look at the different investment
options available in Australia which you might
consider when creating a portfolio.
While property seems to get the lions share of
attention when it comes to investing money in
Australia, a 2017 study by the Australian
Securities Exchange (ASX) revealed that shares,
along with other investments traded on an
exchange, were in fact the most popular
investment choices among Aussies.1,2
What different assets can you invest in?
If youre interested in seeing what your
investment options are outside investing in
property and super, heres a list of some of the
common investment options in Australia you could
consider when building your own investment
portfolio.
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• Cash investments
• Fixed interest or fixed income investments
• Shares
• Managed funds
• Exchange traded funds (ETFs)
• Investment bonds
• Annuities
• Listed investment companies (LICs)
• Real estate investment trusts (REITs)
• Gold
• Emerging trends
• Peer-to-peer lending (P2P)
• Cryptocurrency

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Cash investments
If you put your money into cash investments (such
as savings accounts and term deposits), the
returns will often be lower in comparison to
other investment products. However, these types
of investment options typically provide stable,
low-risk income in the form of a regular interest
payment, so they may be a good option if youre
risk averse or working to a short timeframe.
Fixed interest or fixed income investments
Fixed interest investments (also known as fixed
income or bonds) usually have a set investment
period (eg five years), and provide predictable
income in the form of regular interest payments.
They tend to be less risky when compared to other
types of investments, so can be used to provide
balance and diversity in an investment portfolio.
Fixed interest investments are issued by
governments and companies in Australia and
internationally.
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A government bond is one example of a fixed
interest investment. It provides the holder with
regular interest payments, and once matured, the
amount originally invested (known as the
principal) can be returned to you. However, the
value of the investment doesnt increase with
inflation.
There are also different types of fixed interest
investments with different investment timeframes
and different risks for example, a fixed
interest investment issued by a company can be
risker than one issued by the Australian
government.
Shares
If you purchase shares (also known as equities or
stocks) in Australian or international companies,
youre essentially buying a piece of that
company, making you a shareholder. If the shares
of the company grow in value, the value of your
investment will also increase, and you may
receive a portion of the companys profits in the
form of dividends.
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However, if the share price falls, the value of
your investment will also fall. If you manage the
shares yourself, youll have to decide when to
buy shares, and when to sell them. Its also
worth keeping in mind that you may not receive
any dividends at all.
If youre looking for how to invest in shares,
get in touch with a Smart Financial Advisory
financial adviser who can guide you through the
process.
Managed funds
In a managed fund (also known as a managed
portfolio), your money is pooled with other
investors on your behalf by a fund manager. A
managed fund can focus on one asset class, for
example, an Australian shares managed fund will
only hold shares in Australian companies. Or, it
can be a diversified managed fund and include a
mix of cash, shares and property.
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One of the benefits of pooling your assets in
this way is that it can also give you the ability
to gain access to investments and a level of
diversification that isnt usually obtainable by
an individual.
The amount of money you invest is equal to a set
number of units, and any growth or earnings are
then divided among all investors depending on how
many units each investor owns. Any income
generated on these earnings will also be subject
to tax based on the individual income tax rate of
the owner.
Because investment returns are tied to movements
in investment markets, its important to keep in
mind that putting your money into a managed fund
wont necessarily guarantee you a positive
investment return.
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Annuities
A popular option for retirement, annuities
provide a guaranteed income regardless of whats
happening in financial markets3. These can be in
the form of a series of regular payments either
over a set number of years (fixed-term), or for
the remainder of your life (lifetime annuity).
The payments you receive will depend on things
like the amount you put in and actuarial
calculations, which estimate future outcomes by
looking at economic and demographic trends.
You can purchase an annuity through your super or
with ordinary savings. Its important to note
though, that if youre using your super money for
the purchase, you wont be able to access the
funds until you reach your preservation age and
retire.
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Listed investment companies (LICs)
LICs are a type of investment vehicle which are
incorporated as companies and listed on a stock
exchange. Most LICs operate in a similar way to a
managed fund with an internal or external manager
responsible for selecting and managing the
companys investments on your behalf to provide
diversity. LICs commonly invest in shares in
other companies.
Its important to note that LICs are
closed-ended investments, which means theres a
set amount of shares available that does not
change. Shareholders can come and go, but the
amount of capital in the LIC doesnt change as
investors change. This means the investment
manager can focus on managing the investment,
rather than trying to raise funds if a
shareholder exits the investment or making
additional investments if more investors come on
board.
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Real estate investment trusts (REITs)
A REIT is a type of property fund listed on a
public market, such as the ASX, in which
investors can purchase units. Similar to a
managed fund, your money in the fund is then
pooled and invested in a range of property
assets, which may include commercial, retail,
industrial, or other property sectors.
REITs can provide investors with exposure to the
property market in a way that is more diversified
commercial and industrial property and
potentially more cost-effective than buying a
single property.
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Gold
As a precious metal, gold is a commodity that can
be bought or sold based on set market value. Some
people like to invest in gold as a way to hedge
against inflation. However, investing in physical
gold bars can be cumbersome. Other ways to invest
in gold include buying derivatives, gold
receipts, gold ETFs and gold mining stocks.
Emerging trends
Australias alternative finance market has grown
by 53 in the 12 months to September 2017 as
investors continue to tap into emerging trends
and explore new ways to grow their wealth4. In
addition to the investment options listed above,
there are a number of emerging trends you might
consider when building your wealth.
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Peer-to-peer lending (P2P)
P2P lending is a way you can borrow money without
going through a traditional lender (such as a
bank). It operates by connecting investors with
companies or people looking for a loan.
Most P2P lending is run via an online platform
that acts as an intermediary between investors
and borrowers and charges a fee-for-service.
Through the platform, the lender will be able to
see what loan they would like to fund, and, the
borrower must pay the loan back over time with
interest.
Some platforms also allow investors to diversify
their investment across other assets (such as a
managed fund). The details, including the amount
of control a lender has, length of the loan and
at what interest rate, varies between P2P
providers.
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Cryptocurrency
Unlike regular currency like coins and notes,
cryptocurrency is a virtual currency that exists
as a digital token5. The most well-known type of
cryptocurrency is Bitcoin, but there are hundreds
of others including Ethereum, Litecoin and Ripple.
Cryptocurrencies are kept in a digital wallet and
can be used to pay for real goods and services.
Transactions are recorded using a vast digital
ledger called a blockchain. Its most commonly
used for online payments but can in some cases
can be used in stores. However, because
cryptocurrency is not legal tender, its not
accepted everywhere and is not backed by any
government.
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How to start investing
If youre interested in building your investment
portfolio, you can use these tips to help you get
started
Do your research think about how much you can
afford to invest, what your options are, and what
types of investment products you could use to
help you reach your goals.
Know your risk profile work out how much risk
youre willing to take and what types of
investment products might fit within this.
Different investment products carry with them
different levels of risk, so its important to
understand the risk involved in each investment
product or strategy youre considering.
Speak to an adviser if you have any questions or
want more help or information, speak with us.
Call us on 03 9798 6622 or email us on
pallavi_at_sfadvisory.com.au.
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Contact Us
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