5 types of investments you need to know about

Estimated reading time
 5 min

In this article

• Understanding the power of investing in your super
• Becoming a landlord and owning an investment property
• Buying shares and watching your wealth grow
• Purchasing bonds and earning regular payments
• Investing in ETFs and diversifying your portfolio

Investing is one way to grow your wealth now, so you can feel confident about your finances in the immediate or far-off future.

The secret to being on the path to investing success is figuring out how much you want to invest (and where), your risk appet, and how different investment types might help you achieve your goals – something all budding and experienced investors should think about.

Remember, always do research before investing. Read the T&Cs and product information, find out more about the risks and benefits and consider any fees and charges. You might also want to consult an advisor to get independent financial and tax advice for your circumstances.

If you want to explore some of the most common investment options, you’ve come to the right place. Let’s go.

1. Superannuation

One of the first investments you’ll ever make is superannuation, which is basically the money you’re saving for your retirement.

If you work for an employer, they’re legally obliged to put some of your salary into your super fund each time you get paid. You typically won’t be able to access this money until you’ve hit the preservation age (between 55 and 60 years). But thinking about your super now can set future-you up for success.

Your nominated super fund account will typically do the investing for you, but you can check what type of investment options your fund has to offer and choose one based on your risk appetite and goals. For instance, if you’re young, you might choose an investment that focuses on growth to turbocharge your super balance. Or, if you’re older and close to retirement, you might pick a safer investment option to guarantee returns.

Another way you can invest in your super is to make voluntary contributions (where you can) to make the most of compound interest, which can help grow your wealth more effectively over time.

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2. Owning an investment property

Property is an investment option most people understand. In its simplest form, when you own an investment property you can become a landlord who generates income through a tenant paying rent. Where the investment part comes in is selling the property at a later date once it’s increased in value.¹

If you invest well, investment properties can offer stable returns. But there are some elements you’ll need to consider before you make the investment:

• Think about how you’re going to pay for the new property. Taking out an investment home loan or using the equity you have in a home you own already are some options to consider. It’ll all come down to your money situation and investment goals.
• Research your property’s location as it can affect capital growth (the value of your property over time) and rental yield (the difference between the rent you receive and how much the property costs you). You can get the latest insights on your property options with an ANZ property profile report.
• The type of property plays a role in your investment success too. Apartments and townhouses might be easier to invest in, but a freestanding home might get better (and more profitable) results over time.
• The high initial costs that are associated with acquiring an investment property, such as the initial deposit, stamp duty on the purchase price, legal fees and the ongoing costs and obligations after acquisition such as home loan repayments, maintenance and repairs. There is also potential capital gains tax payable when the property is sold in the future. Plus, if you plan to rent out your property you may need to consider additional insurance or management fees.

3. Shares

When you invest in shares, you’re basically investing in a part of a company. If the company is doing well – like a retailer seeing a bump in sales or a tech platform getting a stack of new subscribers – you might benefit from this growth in two ways:

• Share price growth: the value of your shares increase, which means you can sell them for more later.
• Income paid as dividends: the company pays you some of the profit they earn.²

Wondering how to invest in shares? Then you’ve got two options. You can buy directly through the Australian Securities Exchange (ASX) and manage them on your own, or you can use an online broker service or a full-service broker to buy and manage your shares on your behalf.

Before you start investing, it’s important to consider the facts by:

• Researching the companies you want to invest in. Look at their financial performance and achievements over the last twelve months and see if there are opportunities for the company to grow or be in demand in the future.
• Be financially ready to buy the shares and cover any broker costs you may need to pay. Researching all the fees and terms (such as when you want to buy or sell your shares) can help you feel assured in your investing decision.
• Understand the risk involved. Your investment can be higher-risk or lower-risk, which basically means you might make more with the risk of losing more (higher-risk) or you might make less but your initial investment will be protected (lower-risk).
• Investing in shares is often considered a higher-risk option as the companies you invest in might not make a profit that you can benefit from, and they are exposed to global market volatility. However, there’s always a chance that they will, which is what can make it a high-risk, high-reward investment.

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4. Bonds

A bond is a long-term investment where you basically lend money to a government, corporation, or insurance company. Government and corporate bonds can help you earn passive income as interest is paid to you every six months. Meanwhile, some insurance bonds accumulate earnings that are paid to you at the end of the holding period, which is the amount of time you own the bond, which is usually ten years or more.

Because bonds tend to provide regular interest payments and a return when the bond matures (reaches its end date), they’re considered a lower-risk and safer investment option – even though their value can be influenced by changes in interest rates.

To make the most of your bond investment, hold onto your bond until it reaches maturity – essentially the end date of the bond's lifecycle. This date will be locked in when you purchase the bond. Selling at maturity means you can get back the money you initially lent out. But if you sell before maturity, you’ll get back the market value, which might be lower than the initial amount you paid.

If you invest in insurance bonds these can offer a tax efficient way of investing if structured properly and if held for the minimum amount of time (typically this is about 10 years). These instruments can be complex so we would recommend that you discuss any potential investment with a registered tax agent and ensure that you are familiar with the terms and conditions of the instrument.

5. Exchange Traded Funds (ETFs)

Exchange Traded Funds (ETFs) are a lower-cost way you may be able to earn a small profit from a portfolio of investments in a specific market or commodity (everyday goods, like energy or metal). ³

ETFs can help you diversify your investment portfolio and spread out the risk of investing. Having said that, there is some risk when it comes to investing in ETFs. For example, if the market or sector your ETF is part of drops in value, your investment will also drop.

No matter what you decide to invest in, it’s always a good idea to chat with an expert about your options.

Read more about investing in EFTs