Choose your investments

How to find the right investments to help reach your goals

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To invest well, you need to find investments that fit your financial goals, investing time frame and risk tolerance.

Get an overview of the different types of investments so you can find the right ones to reach your financial goals.

Types of investments

Investments can be classified as defensive or growth investments.

Defensive investments

Defensive investments are investments that are expected to have a lower chance of going down in value. They aim to provide income and protect the capital invested. However, as the investment risk is lower, the long-term returns may also be lower. Defensive investments include cash and fixed interest products.

There are lots of reasons why people might choose to hold defensive investments. For example, they might:

feel too anxious if the value of investments go up and down
want to use some of the money in the short term

Investment examples

Characteristics

Risk and investing time frame

Cash

Includes bank accounts, high interest savings accounts and term deposits.
Used for liquidity (easily accessible) and to diversify a portfolio.

Risk: very low risk of losing money, however inflation will decrease the real value of the capital over time.
Time frame: short term, 0–3 years

Fixed interest

Includes government bonds, corporate bonds, debentures, and capital notes.
Used to earn a steady rate of income and diversify a portfolio.

Risk: variable risk of losing money, depending on the type of fixed interest. The capital value may not keep pace with inflation.
Time frame: short term, 1–3 years but may be longer for some investments

Note: Some types of private credit and debentures are associated with higher risk and are not always defensive.

Growth investments

Growth investments have a higher risk of going up and down in value. They aim to provide a higher long-term return compared to defensive investments, with a mixture of income and capital growth.

The capital value of growth assets is far more likely to be volatile over the short term.

People might hold growth investments to:

Earn a higher rate of return (but this comes with higher risk).
Meet longer term financial goals, five years or more.

Growth investments include shares, property and alternative investments.

Investment	Characteristics	Risk and investing time frame
Property	Includes investing in residential and commercial property. Used to earn a steady rate of income (rent) and offer capital growth.	Risk: medium to high Time frame: long term, at least 5 years
Shares	Investing in a company. You get to vote on management and share in the profits. Offer capital growth and some provide income (dividends).	Risk: high Time frame: long term, at least 5 years
Alternative investments	Includes private equity, private credit, infrastructure, commodities and other investments that don’t fall into the investment classes above. Most aim to provide capital growth. Some have the potential for steady income.	Most alternative assets are high risk. Returns differ depending on the type of alternative investment.

Different ways of investing

You can invest money either on a public market, such as the Australian Securities Exchange (ASX), or outside of public markets.

Products available on public markets include listed company shares, Real Estate Investment Trusts, Listed Investment Trusts, Exchange Traded Funds, and Government and corporate bonds.

You can also invest outside of public markets. For example, you could purchase a term deposit, buy a property, or put money into your superannuation account.

Investments can also be made in private markets, such as unlisted managed funds. Some of these investments are not available generally to individuals and limited to wholesale investors.

How to choose your investments

Before you invest, make sure you research your investment to understand:

How the investment works.
How it generates a return and the type of return expected (capital gain or income).
The risks involved for the investment.
The fees and charges for buying, holding and selling the investment.
How long you should invest to receive the expected return.
Legal and tax implications of the investment.
How the investment will contribute to your diversified portfolio.

You can find this information in the product disclosure statement (PDS) for the investment.

If you need help choosing the right investments, get financial advice.

Before you sign up to any investment, do your homework to make sure it's legitimate. See investment scams for tips on how to spot a scam.

Decide how you'll invest

When it comes to investing you need to decide whether you'll:

do it yourself, or
pay a professional to do it for you

Both options have their pros and cons — and you can, of course, do both.

Buy and sell investments yourself

The advantage of investing yourself is that you're in control of all the decisions. It can also be cheaper than paying someone to invest your money. The risk is that you may overrate your expertise and may not understand the risks, fees, tax implications and timeframe of what you’re investing in.

If you invest directly, it's important to plan and put in the time to research your investments. You should also keep track of how they're performing.

Use a professional investment manager

If you invest in a managed fund, some managed accounts, exchange-traded fund (ETF) or a listed investment company (LIC) your money is pooled with other investors. A professional investment manager then buys and sells investments on your behalf.

When you use a professional, you benefit from their skills and knowledge to make investment decisions. But you have to pay fees for this service. These can include management fees, administration fees and entry and exit fees.

See managed funds and ETFs to learn more about these investments.

Get advice from a financial adviser

For a fee, a financial adviser can help you set your financial goals, understand your risk tolerance and find the right investments. See financial advice for more information.

Invest through your super

Your superannuation is also an investment, and most super funds offer you a number of different ways to invest your money. See super investment options for more detail.