While it's a good idea to seek professional advice before you take the plunge, understanding the investment basics will give you the confidence to get started. Here's a quick look at the most common types of Asset Class that you can invest in.
When you buy shares, also known as equities, you buy part-ownership of a company. Listed shares can be bought and sold on an exchange such as the Australian Securities Exchange (ASX). Through shares, you can hold an ownership stake in local and international businesses across a wide range of industries. Shares are generally considered a growth asset, which means they offer potentially higher returns than other asset classes. But share prices can also experience highs and lows over the short term.
Like shares, property (real estate) is often considered a growth asset class, offering the potential for higher returns on both capital growth and income. You can invest in property without buying a whole house. Through listed property trusts or securities as they are also known, you can effectively own a small percentage of a residential, commercial or industrial property. Listed property securities can give you exposure to a property asset class that is relatively easy to buy and sell (when compared to a direct investment in property).
Cash investments are not limited to putting money in the bank. There are cash management trusts, which are managed funds that invest in the short-term money market. They can offer similar security and access as bank savings accounts, but often at a better rate of interest, though additional fees and costs may apply. These kinds of cash investments can be considered safer options however, gains may be eroded by inflation – when high inflation reduces the buying power of your dollars faster than the interest you're earning.
Bonds are also known as fixed-interest securities. They pay a pre-determined, recurring amount of interest, and also repay your investment principal at a pre-set date in the future, known as the maturity date. Bonds can perform better than other assets at certain points in the economic cycle, so they can help to diversify your portfolio. Bonds are generally regarded as a lower-risk asset class than shares or property but be aware that there are different types of bonds with varying levels of risk.
Read here for more information on get started investing.
This information is current as at 27 January 2014.
BT - Part of Westpac Banking Corporation. This document provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information does not constitute financial advice. It has been prepared without taking account of your objectives, financial situation or needs. Because of this, before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation and needs. Information in this blog that has been provided by third parties has not been independently verified and BT is not in any way responsible for such information.