Investing is an excellent way to increase your profit over time. However, it can be challenging to know where to start. If you’re looking for some easy ways to invest in Australia, there are some ways you can consider, and there are some things you need to know before deciding on an investment platform.
Index funds are a type of investment vehicle that tracks a specific market index, such as the ASX 200. Index funds provide exposure to a broad range of stocks in a single investment, which can offer diversification and potentially reduce risk. Investors typically invest in index funds through a managed or exchange-traded fund (ETF).
Shares are an ownership interest in a company. When you buy shares in a company, you become a shareholder. Shareholders can vote on board members and critical company decisions and receive a portion of the profits if the company does well. You can buy shares through a stockbroker or an online platform.
Managed funds are investment vehicles that an investment manager professionally manages. Managed funds can offer diversification and potentially reduce risk as they invest in various assets, including shares, property and cash. Managed funds typically have higher fees than other types of investments.
Term deposits are a type of savings account where you deposit money for a set period, typically between one and five years. During the term, you typically won’t be able to access your money without paying the penalty. Term deposits often offer higher interest rates than other types of savings accounts.
Property can be a more hands-on investment than some other options, but it can also offer the potential for significant returns. When investing in property, you can buy an investment property to rent out or invest in a property development project. Risks associated with investing in property include negative cash flow and tax implications for capital gains.
Benefits of investing
Investing can offer diversification
Investing in a range of assets can offer diversification and potentially reduce risk. By spreading your money across different asset classes, you may be able to protect your investment from volatility in any one area.
You can control how much risk you take on
When investing, you can choose how much risk you’re willing to take. For example, investing in shares may offer the potential for higher returns than a term deposit, but it also comes with more risk.
Investing can offer tax advantages
Depending on the investment type and circumstances, some tax advantages may exist. For example, Australian shares held for more than 12 months may be eligible for the capital gains tax discount.
You don’t have to be wealthy to invest
Investing is not just for the wealthy. Anyone can start investing with a small amount of money. For example, you can start investing in shares with as little as $500 through an online broker.
How to get started
Decide what you want to achieve
The first step is to determine what you’re trying to achieve with your investment. Do you want to grow your money over the long term or generate income? What are your goals and timeframes? Knowing this will help you choose the suitable investment for you.
Consider your attitude toward risk
How much risk are you willing to take? Are you comfortable with the potential for volatile markets, or would you prefer a more stable investment? Your attitude to risk is an essential factor to consider when choosing where to invest your money.
Choose an investment strategy
There are several different investment strategies you can choose from, including index funds, shares, managed funds and term deposits. Deciding which strategy is right for you will depend on your goals, timeframe and attitude to risk.
Do your research
Once you’ve selected an investment strategy, it’s essential to do your research to find the right investment product. A range of different products is available, so it’s important to compare features and fees before deciding.
The final step is to start investing. Once you’ve chosen an investment product, you’ll need to open an account and make a deposit. Then you can start growing your money.