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More Investment Options

Wealth-IQ Different Investment Options and Types

Different Investment Types

Here is a list of some of the more common investment options for consideration when building your own investment portfolio.

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.

Therefore, they may be a good option if you’re 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 (e.g., five years), and provide predictable income in the form of regular interest payments. For this reason, they tend to be less risky when compared to other types of investments. Therefore, they 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.

Shares

If you purchase shares (also known as equities or stocks) in Australian or international companies, you’re essentially buying a piece of that company, making you a shareholder.

Consequently, if the shares of the company grow in value, the value of your investment will also increase. Additionally, you may receive a portion of the company’s profits in the form of dividends. However, if the share price falls, the value of your investment will also fall. 

Managed funds

In a managed fund, 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.

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.

Exchange traded funds (ETFs)

An ETF is a type of managed fund that can be bought and sold on an exchange, such as the Australian Stock Exchange (ASX). They track a particular asset or market index.

ETFs are usually ‘passive’ investment options as the majority of these investment products aim to track an index. As such, they generally don’t try to outperform it. This means the value of your investment in an ETF will go up and down in line with the index it is tracking.

Investment bonds

Like a managed fund, if you decide to put money into an investment or growth bond (also known as an insurance bond), your money will generally be pooled with money from other investors, with an investment manager overseeing the funds and making the day-to-day investment decisions.

The main point of difference with investment bonds is the way earnings are taxed.

It means that if you hold onto an investment bond for at least 10 years, you won’t have to pay additional tax on any profits that you’ve made when you eventually sell (or redeem) your investment. 

Annuities

A popular option for retirement, annuities provide a guaranteed income regardless of what’s happening in financial markets. 

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).

You can purchase an annuity through your super or with ordinary savings. 

Real estate investment trusts (REITs)

An 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.

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.

Having said that, investing in physical gold bars can be cumbersome. Even so, other ways to invest in gold include buying derivatives, gold receipts, gold ETFs and gold mining stocks.

Cryptocurrency

SPECIAL NOTE: Financial Planners are prohibited by law to offer advice on cryptocurrency.

Unlike regular currency like coins and notes, cryptocurrency is a virtual currency that exists as a digital token. The most well-known type of cryptocurrency is Bitcoin. There are however, 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.  It’s most commonly used for online payments but can in some cases can be used in stores.

Whatever decisions you come to in making investments, it’s always a good idea to get an understanding of your risk tolerance first.

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