Ready to dive into investing? Here’s what you should know

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Ready to dive into investing? Here’s what you should know

Obtaining financial security or reaching a financial goal can lead you to a fork in the road.

In one direction, you can slowly (but surely) squirrel away your savings, avoid most risk and market volatility. Alternatively, you have the opportunity to accept the additional risk and accelerate towards your financial goals. Factors to consider when making this decision are:

  • Time – How long you want to invest for
  • Tolerance – How much risk you are comfortable with
  • Capacity – What your current health and financial circumstances are

Your financial and lifestyle goals may include saving for retirement, ensuring your mortgage is paid off or to have a second source of income. To achieve this, building wealth and creating an investment portfolio can seem extremely difficult to anyone who’s only familiar with financial products such as bank accounts and term deposits.

In recent years, we have seen a huge increase in the number of people investing their savings and surplus cash flow in ways other than savings accounts or term deposits.

According to the Australian Securities Exchange (ASX), close to 9 million Australians hold investments outside of superannuation or their home with more than half investing in assets such as direct shares, Exchange Traded Funds (ETFs), Managed Funds, Managed Accounts (SMAs) or property.

Here at MBA, our team can guide you through the many options available to you to make sure your wealth creation plans are on track.

Here are a few investments options:

ETF’s (Exchange Traded Funds)

An ETF is a managed fund that you can invest in. In Australia, most ETFs are passive investments that don’t try to outperform the market. The role of the fund manager is to track the value of an index, for example, the ASX200, S&P500 or a specific commodity such as gold. The value of the ETF does go up or down with the index or asset they’re tracking.

The benefits of using ETFs are diversification, reporting transparency, low costs and simplicity of trading. These are crucial factors for first-time investors looking to gain familiarity and experience in how the market works and operates.

Managed Funds

A managed fund involves pooling together money from different investors into one fund that is invested and controlled by a professional investment manager. Funds differ in the types of assets you can invest in. You can invest in a single asset class such as shares or fixed interest or a multi-sector option such as growth or balanced fund, which contain a mix of different asset classes. The main benefit of using managed funds is that the investor can choose a fund that is suited to their needs and objectives.

The level of risk that a managed fund attracts will depend entirely on the individual fund that you choose. Therefore, a major part of our planning process involves knowing your risk-profile prior to making the right decision in selecting these funds.

Typically speaking, a managed fund aims to outperform an indexed market as part of its investment strategy allowing investors to reap higher returns over other types of investments such as an ETF. In terms of which to use, clients who choose to invest larger sums of money will often use multiple managed funds from a variety of asset classes in order to diversify your portfolio. Smaller balances on the other hand will benefit from using a multi-sector fund that allows investors to reap the benefits of spreading the risk over several sectors whilst keeping management costs low until the balance of the account grows and further diversification is required.

Managed Accounts (SMAs)

SMAs differ from managed funds in that each portfolio is unique to a single account (hence the name). In other words, if you set up a separate account with Manager A, then Manager A has the discretion to make decisions for this account that may be different from decisions made for other accounts. Managed funds cannot offer, due to their structure as investments shared by a group of investors, the benefit of customized portfolio management. Separate accounts overcome this barrier.

The high level of customisation is one of the main benefits for SMAs, particularly when it comes to individual accounts. SMA’s generally have higher balances.

In Summary

Committing to taking money out of your savings and placing it in any one of the above investment options can be daunting. Professionally planned personal strategies can assist you in achieving your goals.

Next Steps

If you are committed to improving your personal or family’s financial situation, please complete the following booking form and Krisna Ngetis, Associate Advisor will contact you to arrange a free consultation.

*Please note, investing money in any of the above-referenced ways is not guaranteed to increase your wealth. Please contact your financial adviser before considering any investment strategies.

The advice provided here is general in nature only as, in preparing it we did not take account of your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs and objectives. You should consider the relevant Product Disclosure Statement before making any decision relating to a financial product.