Investment Strategies
Investment Strategies
Despite what sometimes appears to be an array of investment options from forex trading to complex derivatives, shipping containers to precious gemstones, when you undertake a serious assessment of your investment opportunities they ultimately come down to 3 fundamental choices.
SHARES – CASH – PROPERTY
Shares
Shares and stocks of companies are traded publicly through stock exchange platforms. Despite your opinion of this asset, you may already be exposed to shares through your managed funds and superannuation. Investing in shares is effectively taking part ownership of a company and the benefits of its value, through share prices or company dividends.
Positives: Ease of entry with relatively low capital requirements, relatively liquid and proven long-term returns, access to blue-chip organisations throughout the world.
Negatives: Can be extremely volatile, return on investments often favour the proficient investor and share prices can irreversibly collapse.
Cash
Cash investments are generally in the form of current accounts and term deposits. Whilst both offer a hedge against capital loss the advantages of a term deposit over a simple account are also competitive interest rates and the opportunity of compound growth. But both these options would more appropriately be described as saving mechanisms as opposed to investments.
Positives: Saving cash has minimal risks, particularly in Australia where our banks are AAA rated institutions and deposits, are effectively guaranteed against loss, it is a flexible arrangement with multiple options to access funds readily available.
Negatives: It will never generate the returns of your top performing asset classes and unleveraged will not fulfil its potential.
Investment Property
Property in this instance is an investment class outside of your principal place of residence, an asset in its own right. Property as an asset class is often the gap in our portfolios and with official ATO figures stating that less than 8% of Australians report owning an Investment Property we can quickly realise just how many of us have this gap, possibly due to the perceived entry costs of this asset class. Property as an investment asset is represented in the portfolios of the “wealthy “ across the world and underpins many of the most successful managed funds. Property is considered a real asset and is a safe haven in periods of volatility, a stable and efficient long-term hedge against risk yet is a proven growth asset having delivered consistent returns in established economies throughout the world for decades upon decades.