Investment and Advice
Investment in Australia encompasses a diverse landscape of opportunities. However, it can be risky for those who venture without the proper knowledge, experience, and guidance.
There is a clamor for a quick, ‘play the markets’ strategy. After all, younger investors who belong to the Gen Z group tend to seek short-term results – about 21% of Gen Z investors are investing in more speculative assets to take advantage of the market. However, short-term investment strategies do not usually foster a balanced portfolio.
Expert guidance in the world of investing can make a big difference in how to navigate your options. Let’s discuss what it is investment portfolio trends now, what risk considerations are essential for today’s investors, and what an investment broker can offer for first-time clients.
What are investment trends now?
In a recent study by the Australian Securities and Exchange (ASX), over 5,500 adults were surveyed about investor attitudes and movements.
Data shows that since 2020, more Aussies are investing in assets other than their residential homes. In fact, of the 20 million adults who consider themselves investors, about 8 million have never invested outside their residential property or their super. When active investments are happening, there are also about 1.84 million Aussies with lapsed investments.
What type of investments do clients own?
The most popular asset is Australian shares held directly, which make up 58% of the total among investors. Residential property investment makes up about 35% of owned assets, and term deposits come third at 28%, respectively. Younger generations are seen to place growing interest in investments such as Exchange Traded Funds (ETFs) beyond residential real estate, coming in fourth (20%) among the preferred assets of choice.
Income-wise, these active investors have an average income of $96,000 and manage a median investment portfolio size of $170,000.
Most investors are planning to reach certain financial milestones within the next 3 years with their investment. The top reasons include having funds for a holiday, getting their budget in order, and paying off debt. But the overarching goal for investors – whether they are next-gen, wealth accumulators, or pre-retiree investors – is to focus on investments that build a sustainable income stream.
Australians and their super
Active investors usually own residential homes and super funds. Super is considered a valuable investment that you can build towards retirement.
The average super amount for Aussies is about $163,064. This fund is meant to be a cushion for retirees, but younger generations believe that it could help with rising costs and expenses today. About 56% of respondents mention that they prefer to take out and use money from their super, and there are several investment-related reasons why they would want to use their super pre-retirement.
The biggest reason is to help alleviate current living pressures. This was followed by individuals who said they prefer to use their super to buy a home (15%), those who will use the funds for investment property (8%), and those who will buy a home for their kids (4%).
Accessing super funds early is allowed in some schemes, such as the First Home Super Save Scheme, and if you declare financial hardship. But the tempting prospect of early access to super funds doesn’t mean it’s a wise decision. Financial experts argue that taking money from it now could mean risking tens of thousands of dollars off your retirement fund.
If you want expert advice about utilising your super, our brokers are available for consultation. We recognise the significance of expert guidance in your investments, especially in your super. Our team can guide and strategize with you every step of the way. Talk to us today.
What are investment risks?
Investing is a journey marked by potential rewards and risks. One of the foremost considerations when entering the world of investments is comprehending the various risks associated with it. Risk is the likelihood that you may encounter financial losses in your investment endeavors. This can happen when your investments either decrease in value or do not perform as positively as you have projected. It’s important to recognize that every type of asset carries a certain level of investment risk, with some being inherently riskier than others.
These are some of the key risks that can impact the value of your investments:
Interest Rate Risk: Changes in interest rates can have a significant impact on your investment returns. This risk is particularly relevant for fixed-interest investments.
Market Risk: Market fluctuations driven by economic changes or unforeseen events can cause the value of your investments to decline. This type of risk affects the entire market.
Sector Risk: Investments linked to a specific industry sector can be vulnerable to events that impact that sector.
Currency Risk: Currency movements can influence your investment values and returns, particularly for overseas investments, Australian companies with international operations, and investments denominated in foreign currencies.
Liquidity Risk: Liquidity risk arises when you’re unable to sell your investments without affecting their market price.
Credit Risk: This risk comes into play when a company or government entity you’ve lent money to defaults on its debt and cannot make the required repayments.
Concentration Risk: Failing to diversify your investments can expose you to substantial risk. Poor performance in one investment or asset class can significantly impact your overall portfolio.
Inflation Risk: If your investments don’t keep pace with inflation, the real value of your money may diminish over time.
Timing Risk: The timing of your investment decisions can influence your returns and potential capital loss.
Gearing Risk: Using borrowed funds to invest can amplify your losses. Even if your investments decline in value, you’re still obligated to repay the remaining loan balance and associated interest.
Understanding investment risks is a crucial step in making informed investment decisions. It empowers you to assess and manage risk effectively as you work toward your financial goals.
There is no single right investment; it depends on your risk appetite, time frame, financial goals, dedicated time to your investment, and what your overall attitude about investment is. Let our investment brokers offer insights, strategies, and guidance to create the most seamless investment plan for you.
Do you need financial advice for your investment?
Investing isn’t so much about the amount of money you are placing as much as the type of investment that works for your specific needs. The biggest misconception is that it is only for the rich – investment is for every person regardless of wealth level, gender, age, and income – if you understand what it entails.
Reaching that deeper level of understanding with investments means working with experts. Studies show that individuals who receive financial advice tend to keep up with economic trends and maintain long-term financial goals.
Nearly half (47%) of Aussies want financial advice from experts, as they believe that advisors have the expertise in finances and can recommend products they would not normally find on their own.
Of course, there are also individuals who do not opt for expert advice as they prefer to manage their own money or view expert financial advice as being too expensive.
For those who value the gift of time with a financial planner, Intellichoice is your accessible team. We can check the real estate or exchange markets and formulate a plan tailored to your short-term and long-term goals. Talk to our professionals today and take the first step toward a prosperous investment future.
