Choose your investments

Build your portfolio

Your mix of investments should be based on reasonable returns over your desired timeframe and a level of risk you are comfortable with.

Short-term investments (1-3 years)

A short-term investor should be looking for investments with:

  • Risk - very low risk of losing your money
  • Volatility - very low, unlikely the value of your savings will fall
  • Expected return - 2-3% per year (long-term average return)

Suitable products could be:  

  • Online savings account (if you could need the cash at any time)
  • Term deposit (if you know how long your money can be locked away). Don't let it rollover automatically as it may not be in your best interests

These products could be suitable because the money is available when you need it but they still give a reasonable return.

Ask yourself:

  • How quickly will I be able to get my money when I need it?
  • Is it easy to add more savings?
  • Am I getting a good interest rate?

Medium-term investments (4-6 years)

Medium-term investors should look for investments with:

  • Risk - medium-level possibility of losing some of your money
  • Volatility - medium; capital value could go up or down 20% in a year
  • Expected return - 4-5% per year (on average over 10 years)

A suitable product could be a balanced investment option in a managed fund. If your timeframe is closer to 4 years, a more conservative investment option may be suitable.

This could be suitable because:

  • It is expected to provide better returns than a bank account over the same period
  • Any short-term periods of negative returns should grow back over the period that you are investing
  • It is easy to add money to the investment

Ask yourself, can I cope with some risk in order to let my money grow over the medium term?

Long-term investments (7 or more years)

Long-term investors are looking for investments with:

  • Risk - high, with negative returns expected 4-5 years out of 20
  • Volatility - high, capital value could go up or down by 40% in a year
  • Expected return - 5-6% per year (on average over 10+ years)

A suitable product could be a growth or high growth option in a superannuation fund or managed fund or direct shares.

This could be suitable because:

  • It is expected to provide long-term returns better than a bank account
  • Your capital should grow over time making up for short-term periods of negative returns

Ask yourself, what's the best way to make my money grow over the long-term and will I be too stressed by short-term fluctuations?

Your investment options

Here are the typical investment characteristics of different types of investments options.

Different funds may have different names for their portfolios and asset allocations may not be the same as ours. Read the fund's PDS to find out how money will be allocated for each investment option.

Investment mix Typical characteristics

Growth

darkblue-legend Around 85% in shares and property
lightblue-legend The rest in cash or fixed interest

Growth-piechart

Investment: $10,000 after 5 years = $12,800

Expected return: 5.0%
(gross returns before fees and taxes)

Volatility: High volatility-high

Expect a loss: 4-5 years in 20

Balanced

darkblue-legend Around 70% in shares and property
lightblue-legend The rest in cash or fixed interest

Balanced-piechart

Investment: $10,000 after 5 years = $12,600

Expected return: 4.8%
(gross returns before fees and taxes)

Volatility: Medium volatility-low

Expect a loss: 3 years in 20

Conservative

darkblue-legend Around 30% in shares and property
lightblue-legend The rest in cash or fixed interest

Conservative-piechart

Investment: $10,000 after 5 years = $12,100

Expected return: 3.8%
(gross returns before fees and taxes)

Volatility: Low volatility-low

Expect a loss: 1 year in 20

Cash

darkblue-legend 100% in deposits with Australian deposit-taking institutions

Cash-piechart

Investment: $10,000 after 5 years = $11,400

Expected return: 2.7%
(gross returns before fees and taxes)

Volatility: Very low volatility-low

Expect a loss: 0 years in 20

* These expected returns are based on actuarial advice received in May 2018. Actual returns can vary significantly from year to year and could be negative in some years, particularly for investment mixes where more is invested in shares and property.

Check out the investment

Make sure you have enough information to understand how the investment product works and identify the associated risks.

See if you can describe how the investment product works to a friend.

Find out:

  • How your money will be invested
  • How the product will generate returns
  • How the returns will be paid to you

If you don't understand it, don't invest in it.

Here are some checks you should do:

It's best to stick with mainstream, reliable, tried and tested investments.

Check fees and charges

What are the commissions, fees or other charges? What is the interest, if you're borrowing to invest? All costs reduce the return on your money. Know what you're buying and how you're paying for it.

Check legal and tax issues

Your financial and tax situation may be different from your neighbour's or workmate's. You may need to get professional advice about how an investment will affect your particular situation. A solicitor can explain your legal obligations and an accountant can explain tax issues.

See make tax work for you for more information.

Now that you've chosen your investments, your final step is to put some processes in place to keep track of your investments.


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Last updated: 21 May 2019