It’s an oldie but a goodie – never put all your eggs into one basket. But, what’s the best way to grow your wealth with investment options outside cash.
Saving your money is important. But, putting your money into a savings account, even with a decent interest rate, may not be the best way to grow your wealth.
Diversifying your portfolio across a mix of different investments may help reduce your risk and deliver smoother returns over the long-term. As every asset class is unique, each will be impacted differently by market ups and downs. So by having a broad spread of investments you’re limiting the impact of a single event on your portfolio, which may lead to you achieving greater returns over time.1
When constructing your portfolio it’s important to think strategically about your investment mix and your appetite for risk. We can work with you to determine the mix that’s right for you, including some investments that have a higher risk, and therefore a higher reward, as well as some investments with a lower risk and reward. These are called growth assets and defensive assets respectively.
Your investment options
There are plenty of investment options other than a savings account.
Shares – considered a growth investment, shares are a medium to long-term investment. While your original investment may grow over time, you may also receive income from dividends.2
Property – also a long-term investment option, you can either invest directly in a particular property or indirectly through a property investment fund.3
Exchange traded funds (EFTs) – a managed fund that can be bought and sold on an exchange, such as the ASX. They’re generally easy to buy and sell and have lower fees than other investment options.4
Bonds – these are fixed income assets and generally provide a reliable return. In simplest terms, bonds are an IOU between the borrower and the lender (you). You’ll receive interest payments throughout the period of the bond.5
Think outside the box
On top of more traditional investment options, there are some emerging trends. Australia’s alternative finance market continues to grow, hitting over US$1 billion, giving you more ways to invest.6
Peer to peer lending – online platforms are used to navigate connecting investors with companies or start-ups. Interest on the loan is paid, so your original investment grows over time.4
Collectables – things like art, wine, books or vehicles can be classified as a niche area, but if you’re interested or have a passion for these types of items, it’s definitely an area worth investigating. It is important to note that collectables will often take many years to increase in market value, and they don’t typically provide any form of income until you sell them.7
Making a decision
Things don’t always go to plan. Occasionally, your investment might take a loss or even fail completely. However, if you have a diversified portfolio, you’re not risking all of your wealth.
Talk to us today about why and how you can diversify your portfolio by calling our Oran Park office.
1: Australian Government Australian Securities & Investments Commission (2018). MoneySmart. [online] Moneysmart.gov.au. Available at: https://www.moneysmart.gov.au/investing/investsmarter/risk-and-return/diversification [Accessed 26 Aug. 2019].
3: Commsec.com.au. (2019). What are the different types of investments? [online] Available at: https://www.commsec.com.au/support/learn/investin g-basics/what-are-the-different-types-ofinvestments.html [Accessed 30 Sep. 2019].
4: Amp.com.au. (2019). AMP Limited. [online] Available at https://www.amp.com.au/personal/hub/grow-mywealth/ways-to-invest [Accessed 30 Sep. 2019].
Pollari, I. (2018). Diversifying Growth: The 3rd Asia Pacific Alternative Finance Industry Report. [online] KPMG. Available at: https://home.kpmg/au/en/home/insights/2018/12/div ersifying-growth-asia-pacific-alternative-financereport.html [Accessed 30 Sep. 2019]. 7. Canstar. (2019). Pros And Cons Of Investing In Collectables | Canstar. [online] Available at: https://www.canstar.com.au/self-managedsuper/invest-collection-pros-cons-collectables/ [Accessed 30 Sep. 2019].
Principal Financial Planner at RP Wealth Management | Financial Planning l SMSF I Insurance l Property Advisory. Our purpose is to provide our clients with sound advice and direction to assist with their financial affairs and help them make the best choices in achieving what is important to them.
