12 smart investment options in Australia

1. 12 SMART INVESTMENT OPTIONS IN AUSTRALIA www.sfadvisory.com.au +61 3 9798 6622

2. There’s 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 lion’s 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 you’re interested in seeing what your investment options are outside investing in property and super, here’s a list of some of the common investment options in Australia you could consider when building your own investment portfolio. www.sfadvisory.com.au +61 3 9798 6622

3. 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 www.sfadvisory.com.au +61 3 9798 6622

4. 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 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 (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. www.sfadvisory.com.au +61 3 9798 6622

5. 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 doesn’t 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, you’re 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 company’s profits in the form of dividends. www.sfadvisory.com.au +61 3 9798 6622

6. However, if the share price falls, the value of your investment will also fall. If you manage the shares yourself, you’ll have to decide when to buy shares, and when to sell them. It’s also worth keeping in mind that you may not receive any dividends at all. If you’re 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. www.sfadvisory.com.au +61 3 9798 6622

7. 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 isn’t 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, it’s important to keep in mind that putting your money into a managed fund won’t necessarily guarantee you a positive investment return. www.sfadvisory.com.au +61 3 9798 6622

8. Annuities A popular option for retirement, annuities provide a guaranteed income regardless of what’s 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. It’s important to note though, that if you’re using your super money for the purchase, you won’t be able to access the funds until you reach your preservation age and retire. www.sfadvisory.com.au +61 3 9798 6622

9. 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 company’s investments on your behalf to provide diversity. LICs commonly invest in shares in other companies. It’s important to note that LICs are ‘closed-ended’ investments, which means there’s a set amount of shares available that does not change. Shareholders can come and go, but the amount of capital in the LIC doesn’t 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. www.sfadvisory.com.au +61 3 9798 6622

10. 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. www.sfadvisory.com.au +61 3 9798 6622

11. 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 Australia’s 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. www.sfadvisory.com.au +61 3 9798 6622

12. 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. www.sfadvisory.com.au +61 3 9798 6622

13. 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. It’s most commonly used for online payments but can in some cases can be used in stores. However, because cryptocurrency is not legal tender, it’s not accepted everywhere and is not backed by any government. www.sfadvisory.com.au +61 3 9798 6622

14. How to start investing If you’re 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 you’re willing to take and what types of investment products might fit within this. Different investment products carry with them different levels of risk, so it’s important to understand the risk involved in each investment product or strategy you’re 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@sfadvisory.com.au. www.sfadvisory.com.au +61 3 9798 6622

15. Contact Us Address: FivewaysBusiness Centre, 7 Keysborough Close (First Floor), Keysborough, VIC, 3173 Australia PH: +61 3 9798 6622 Email: clientservices@sfadvisory.com.au Web: www.sfadvisory.com.au www.sfadvisory.com.au +61 3 9798 6622