There are a variety of investment possibilites, each with different terms, conditions, considerations and risk. The main types of investment account are Managed Funds and EFT`s, Shares, International Investments, Investments paying interest such as ISA`s and Term Deposits, Gold, Property Investment and Superannuation. You may wish to combine one or more of these possibilites to create a balanced portfolio, or consider that some are more appropriate for your age, personal or financial situation than others.
Managed Funds
A managed fund is one type of 'managed investment scheme'.
Exchange Traded Funds / EFT`s
Individual Savings Accounts / ISA`s
Term Deposits
Superannuation
Superannuation, or ‘super’, is a way to save money for your future. It is important to understand how much super you’ll need, and how to best manage the money for your retirement. Through super, you can hold a wide range of investments such as shares, property and cash. Superannuation is attractive because it receives favourable tax treatment, both when you are working and once you have retired. The government offers these tax savings to encourage you to build your super assets. Employers must typically pay superannuation contributions on behalf of their employees. You can also choose to add money into superannuation out of your own pocket. If you are self-employed, you can choose whether to contribute to superannuation.
Shares
Depending on the specific equities you choose, buying equities such as publicly-listed shares can provide high returns, but can also provide significant losses, hence it is considered a risky asset class. Shares are vulnerable to sudden fluctuations in price that can result in big gains and losses.
Property Investment
Buying a property to rent out is a popular form of long-term investment. Houses and units are easier to understand than many other types of investments, yet they do have some issues you need to be aware of.
International Investments - Hedge Funds
Set up in 1940s America, hedge funds aim to invest large sums of money into a wide variety of assets. Usually, hedge funds are appropriate investment options for the very wealthy, and as such are rarely offered to regular savers by banking institutions. Many financial institutions will not offer hedge funds, because they are in low demand and involve a considerable amount of work. Militant management of each investment within the hedge fund makes it possible for capital to be invested at high risk but still make great profits. When managed with care, hedge funds tend to outperform traditional investment accounts. However, even with trained, experienced investment managers these funds are very high risk. The idea is to buy stocks low and sell them high, similarly assets such as property are bought when market trends predict that they will rise in value creating good profit margins. However, most hedge funds will also invest capital in less risky schemes to avoid losing huge amounts of money invested by important banking clients. Hedge fund managers tend to charge very large fees because they are committed to a huge amount of work for the fund clients, and so these accounts only provide a viable option for investors with a large amount of capital that they are prepared to lose.
Gold
Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a way of diversifying risk, especially through the use of futures contracts and derivatives. The gold market is subject to speculation and volatility as are other markets.
Bonds
Bonds are essentially certificates which confirm that you have made a 'loan' to a company, or to the government, in that you have invested money in them without receiving a share in their profits (a share certificate) in exchange. These bonds can either be repaid to you at an agreed time with interest, or repaid to you at an agreed time based on their stock market-linked value.
For more information see:
> Bonds
> Notice Accounts - Term Deposits
> Property and Shares
> Managed Funds
> Individual Savings Accounts (ISAs)
