Many Australians like to invest in property. However, property is not the only investment option out there. It is important to think about diversification – spreading your investments across a range of assets, markets and industries. There’s no question that property can be a great investment, it can provide good returns via capital growth and rental income and depending on your circumstances can allow for negative gearing. Although, as with all investments it does have its risks and disadvantages, so what other investment options are available?
1. Australian Shares
You can invest directly into companies listed on the Australian stock exchange. Investing directly into shares allows you to pick and choose the specific companies you want to invest in. Australian shares often pay dividends and have the potential for capital growth. These dividends often have franking credits attached to them which can enhance your ‘after tax’ return.
2. Managed Funds
A managed fund is a pool of money that is invested in a range of different shares or other assets. Investing in a managed fund can allow you to gain exposure to various companies and asset classes, even if you don’t have a huge amount of money to invest. By investing in a range of asset classes you reduce the overall risk in your portfolio and it will allow for smoother returns over the long term. Managed funds often pay distributions and also have the potential for capital growth. In addition, they provide expertise of the fund manager who selects and manages the investments, rather than having to do the research and choose the shares yourself.
3. Exchange Traded Funds
An exchange traded fund is similar to a managed fund but it is listed on the Australian stock exchange. Therefore, trading times (the time it takes to buy or sell) are generally faster than managed funds. Management fees on exchange traded funds are also often lower than managed funds.
4. Investment Bonds
An investment bond is a ‘tax paid’ investment. Tax on investment earnings are paid by the bond issuer at the current company tax rate of 30% and do not need to be included in your personal income tax return. If certain conditions are met, after ten years from the start date, the investment is free of personal income tax in the hands of the investor.
Investing can be complex, and everyone’s financial situation is different. It is important to get the right financial advice to determine the most appropriate investments for your circumstances.
Author: Kelsea Pipe