| There are a great many forms of investment. Broadly, they are classified into four groups: short-term deposits, bonds, property, stocks and shares. Within each asset category there are investments to suit various kinds of risk, duration, returns and liquidity. There are also various ways of investing. You can select the 'do-it-yourself' scheme and invest in more than one asset classes. Or, you can invest in a managed investment fund where specialists make a whole range of investment decisions for you.
1. Short-term deposits
A) Bank savings accounts
A bank savings account is the simplest type of cash investment. Returns are lower compared to other investments, but returns are guaranteed by the bank. You can withdraw a part or the whole amount of money whenever you need (total liquidity).
B) Bank fixed term investments
You give the bank an amount of money for a set term. In return, you get a higher interest rate than you could get from a savings account. You can withdraw your money, but you will receive a lower interest rate.
2. Bonds
The government and businesses issue bonds. You give them an amount for a certain period of time, and they promise to pay a specified interest rate and pay you bank at maturity. Though bonds lock your money away for a specified term, they can be at times traded.
3. Property
Investing in property can be profitable, provided it is well managed. Property investments fall into direct and indirect.
A) Direct property investment decisions
If you have made a direct property investment, you can control the everyday management of your rental property yourself, or use a property management business to do it for you. A property management company takes on the tasks of finding tenants, collecting the rent etc. The fees charged for these services are commonly a percentage of the rental income.
B) Indirect property investment
In case of an indirect property investment, you can make an investment in a private superannuation investment scheme or managed investment fund that invests a part of your sum of money in property. This type of indirect property investment makes it easier for an investor to get the benefits from diversification.
4. Stocks
By investing in stocks of a company listed on a stock exchange you receive the right to share the future income and value of that corporation. Your return comes either in the form of dividends or in the form of capital gains. Difinitely, shares can also go down in value.
Before deciding on a kind of investing scheme, check with your financial adviser. |
