Investments outside super

Grow your nest egg

Outside super, there is a bewildering number of investments on offer. You need to find a mix of investments that will fit your needs.

Security should be at the top of your mind. You will have greater security if you diversify your investments. You might need your money to last for 20 years or more so it's good to have investments that will at least keep pace with inflation. You may also need a reliable, long-term income stream.

Diversify your retirement investments

A key rule to investing in retirement is to diversify. This is even more important for retirees - if you lose money it will be hard to replace.

Some retirees have been devastated because they put all their money in one investment. They lost their life savings when that company went bankrupt, had a run of bad luck or the promoter turned out to be a crook. See diversification for more details.

Case study: Katie diversifies her retirement investments

Mature woman thinking about her diversification strategyKatie has $80,000 that she wants to invest to supplement her super. She decides to invest $40,000 in a mix of blue-chip shares from different industries.

Katie spreads the other half of her money across two diversified managed funds and a term deposit. By diversifying her investments, she can ride the ups and downs of the market.

Capital growth investments

Capital growth investments, such as property and shares, are good if you want to invest your money for the long term (more than 7 years). These investments will generally increase in value over time. Of course, they can also fall in value from time to time, as the global financial crisis showed. Growth investments will hopefully also pay dividends. You can use these as income, or reinvest them for further growth.

Shares and property may be purchased directly. An easier way is to invest in managed funds which own shares or property.


A strong portfolio of blue chip shares can deliver good returns. They are more flexible investments than property as they can be bought and sold in small parcels. Owning shares also has tax benefits. However, share markets are volatile. The value of a share can drop dramatically in a few hours and companies can go broke overnight. This can be daunting for new or nervous investors. See shares for more information.

The Australian Securities Exchange and the Australian Investors Association offer investing courses. Seek financial advice before investing.

Investment properties

Many people invest in residential property to boost their wealth. You can take advantage of capital gains and there are tax benefits arising from negative gearing and depreciation allowances, especially if you are in the higher tax brackets.

However, people in retirement generally will not buy an investment property as their main investment. It is poor diversification. You could lose seriously if property prices fall in that area, if the property is vacant or if tenants don't pay their rent. If you need money you can't sell part of a property, and you can't sell it quickly at a top price. See property for more information.

Case study: John and Angela buy an investment property

Senior couple looking at investment properties on a computerJohn and Angela, both 60, bought an investment property for $150,000, using savings of $40,000 as a deposit. The costs involved in the purchase were $8,000. They borrowed $102,000 and counted on a capital gain to offset their costs. However, the house needed a lot of repairs.

By the time they retired at age 65, the property market had not taken off as they hoped and they only got $140,000 for their house after selling costs and repairs. They lost $18,000, nearly half the money they started with, as well as any money they could have made with their $40,000 savings. If you want to invest in property, start at a younger age and think long term.

Interest-bearing accounts and term deposits

These accounts are a good way to earn money for daily living expenses and emergencies. There are no entry and exit fees and your cash is easily accessible. You are sure of getting your money back, plus any interest. However, you will have to pay fees if you want to get out of a term deposit early.

However, there are no capital gains or tax benefits and the interest you earn may not be enough to keep up with inflation. Interest-bearing savings accounts and term deposits will generally earn you less money in the long term than property or shares.

You should spend some time researching online savings, transaction and term deposit accounts to compare different products.

Managed funds

If you are interested in a diversified mix of investments but aren't sure where to start, or would rather leave the hard work to experienced people, you may want to consider investing in managed funds.

There are many types of funds, fee structures and investment managers. Do your research before you dive in. Retirees need to be careful about mortgage funds and property funds. Although these have been successful in the past, many people have recently burnt their fingers. See managed funds for more information.

Think carefully about your investment strategy as it will affect the income you receive in retirement. Reduce risk by spreading your money in different types of investments. Consider getting financial advice before you start investing.

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Last updated: 14 Feb 2019