Types of Investments

Cash: Cash investments are the most common form of investment in Australia, encompassing products such as bank accounts, term deposits and cash management trusts. The appeal is that they provide easy access to your money when you need it and there is very little chance of ever losing your capital, as they are very secure.

Fixed Interest: Fixed Interest investments and Bonds are effectively loans made to Government institutions or corporate organizations for a set amount, time and rate of interest. In return you normally receive a regular income stream from the interest and at the end of the term you receive your capital back.

Mortgage Funds: These funds borrow money from investors and lend them to borrowers and are called mortgage funds as the borrowings are secured by mortgages over property. Mortgage funds will normally only lend up to 66% of the property value and they normally hold bank deposits and short term market investments to provide liquidity for clients wanting to redeem their money.

Australian Shares: Investing in Australian shares is like being a part owner of a business. You can buy shares through a broker or on-line and if your company makes profits they can distribute the “owners” part of the profit, called a dividend. If the value of your company increases, usually due to profitability then the share price can increase so you are able to get capital growth as well as income. With some companies you can also receive tax benefits through franking credits.

International Shares: Investing in International shares is the same as above but as the Australian share market is approximately 2% of the world market, International shares offer more choice. The tax benefits are less than Australian shares as you generally receive less in the way of dividends and don’t get the benefit of franking credits and you also have to be wary of the changes in exchange rates.

Direct Property: Residential property has always been popular in Australia, as we like to be able to see our investments. You can receive income from the rental and capital growth over time through the increase in value of the property. There can also be good tax deductions in property investments, the main one being depreciation. Like all investments property has positive and negative aspects that need to be considered.

Listed Property: This investment is similar to a share where it is listed on the stock exchange and you buy a share in the company. The company’s assets are held in a trust and usually consist of office buildings, shopping centres and commercial buildings etc. You receive income through dividends from rentals and can also receive capital growth through the increase of your share price due to the increase in asset values of the properties held. These investments are usually quite liquid.

Unlisted Property: Unlisted property investment is where properties are held in a trust but not listed on the stock exchange. You can have a small group of investors with a trust over one building or hundreds of investors owning several buildings. Sometimes liquidity is less in these types of investments but the returns are similar in you should receive income from rent and potential capital growth from the asset and you also receive your share of tax benefits from depreciation etc.

There are hundreds of other investment types in the market place with a wide range of different types of risk but the majority of funds within Australia is invested in the above.