Saving and investing for future growth

In Australia, 51% of adults currently have some form of investment outside their superannuation.

Building long-term wealth requires a strategic balance between saving and investing. While saving provides financial security through readily available funds, investing creates opportunities for substantial wealth accumulation over time.

Here are some investment options to consider in Australia:

• Superannuation: Primary retirement savings vehicle with tax advantages.
• Managed funds: Similar to mutual funds, offering professional portfolio management.
• Share trading accounts: Direct access to ASX-listed companies.
• Term Deposits: Fixed-term savings with guaranteed returns.
• Property.

It can be important to create a diversified strategy as a well-diversified portfolio helps manage risk while maximising potential returns across different market conditions. So be sure to spread investments across different asset classes, consider geographic diversification through international markets and adjust allocation based on risk tolerance and investment timeline.

Investment options explained

In Australia, cash is the most popular investment (32%), followed by term deposits (13%). Investing is a key part of building long-term wealth and preparing for your financial security in retirement. And everyone wants that peace of mind to know that retirement will be a relaxing time where you can do the things you love and not have to constantly stress about not being able to afford your lifestyle.

Below is an overview of some popular investment options, their benefits, and important factors to consider.

Cash

A cash investment refers to low-risk, short-term investment options focusing on capital preservation and liquidity. These investments typically provide modest returns and are suitable for individuals seeking safety and easy access to their funds. Common examples of cash investments include:

• Savings accounts: Regular bank accounts that earn interest on deposited funds.
• Term deposits: Fixed-term savings accounts that offer a guaranteed interest rate over a specified period.
• Money market funds: Pooled funds that invest in high-quality, short-term debt instruments, such as treasury bills or certificates of deposit.

Benefits: Stability, liquidity and predictability.

Risks: Lower returns and inflation risk.

Term deposit

A term deposit is a type of savings account offered by banks and financial institutions where you agree to deposit a fixed amount of money for a set period (the “term”) in exchange for a guaranteed interest rate. Term deposits are considered low-risk investments, ideal for individuals seeking stability and predictable returns.

Benefits: Protected by the Australian Government Deposit Guarantee, provides predictable income and is a set-and-forget situation.

Risks: Returns are more modest and there’s an inflation risk.

Superannuation

Superannuation (known as Super) is Australia’s primary retirement savings channel. Your employer contributes a mandatory percentage of your earnings to your super fund, which invests the money on your behalf. Most super funds allow you to choose from investment options ranging from conservative (low risk, lower returns) to growth (higher risk, higher potential returns).

Benefits: Super offers significant tax advantages, with a concessional tax rate of 15% on earnings, which is lower than most personal income tax rates. Over time, compounding growth can substantially increase your retirement savings.

Tip: Consider making voluntary contributions to boost your Super further and take advantage of the concessional tax rate.

Managed funds

Managed funds pool your money with other investors, and a professional fund manager makes investment decisions on your behalf. The fund manager buys and sells a mix of assets, including shares, bonds, property trusts, and cash investments, depending on the fund’s objectives.

Benefits: Managed funds offer access to professional portfolio management and diversification across asset classes, which can reduce risk.

Risks: Management fees can eat into returns, and investment performance varies depending on market conditions and the fund manager’s expertise.

Tip: Review the fund’s performance history and fee structure before investing.

Property

Investing in property involves purchasing real estate to generate rental income and capital growth. It’s typically a long-term investment, with a recommended minimum of five years to see meaningful returns.

Average return: 6.3% per year over the past decade.

Risks: Property investment carries medium to high risk due to market fluctuations, tenant vacancies, and maintenance costs.

Tip: Research local markets thoroughly and factor in all associated costs, including stamp duty, maintenance, and insurance.

Shares

Investing in shares means buying ownership in companies, either directly or through a trading platform. Shares can deliver high returns but are also highly volatile and are best suited for long-term investors with a minimum horizon of five years. 9.90%

Average return: Australian shares have delivered an average of 6.5% per year over the past decade. Whereas the average return of the US stock market is 10% per year over the past 50 years.

Risks: Shares are considered high-risk investments due to market volatility.

Tip: Diversify your share portfolio across sectors and consider reinvesting dividends to maximise growth.

Other investments

This includes private equity, infrastructure, commodities, and other niche investment options that don’t fall into traditional asset classes.

Risks: These investments are generally high-risk and may lack transparency or liquidity.

Benefits: They can provide diversification and high returns in certain conditions.

Tip: Consider these only as part of a well-diversified portfolio and consult a financial advisor for guidance.

By understanding the risks, rewards, and timelines of different investment options, you can create a balanced strategy tailored to your goals and risk tolerance and set yourself up for the future that you want.

Tips for building your investment strategy

Set clear goals

Define what you’re saving and investing for—retirement, a home, or financial freedom. Knowing your goals will help guide your strategy. The more specific you can get, the better.

Auto-transfers

Setting up automatic transfers to investment accounts ensures consistent contributions while removing emotional decision-making from the investment process.

Understand your risk tolerance

Assess how much risk you’re comfortable with to determine your ideal mix of conservative and growth-oriented investments.

Start early and stay consistent

Time is one of the most powerful factors in growing wealth. And it’s never too early (or too late) to start.

Seek expert advice

A financial advisor can help tailor an investment strategy to suit your unique needs and goals, ensuring you’re on track to achieving financial security.

The sooner you start, the greater the potential for compound growth to work in your favour. Even small, regular contributions can lead to significant wealth over time, especially when combined with a disciplined investment approach.

Take control of your financial future today—plan, diversify, and invest wisely and seek help from professionals like us. Your future self will thank you.

Disclaimer: It is important to seek the advice of a qualified professional before making any financial or accounting decisions. Each individual’s financial situation is unique, and not all information provided may be relevant to your specific circumstances.