Understanding investments

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Understanding investments ‘Investing’ – What is it?

Investing is all about making your money work harder for you and generating additional income. The type of investment you choose will usually depend on two factors: whether your investment has a short-term or long-term goal and the level of risk you are willing to take. There are many different reasons why people want to invest, the common reasons being to make money and to live a comfortable lifestyle in the future.

In this fact sheet, you will learn more about the different asset class options and how they may suit your goals, tips to consider when investing and, more importantly, how a financial adviser can assist with your decision making.

Asset Class options

Also referred to as an ‘Investment Mix’, asset classes define the types of assets that make up your investment portfolio. These include cash, fixed interest, property and shares. Assets are grouped into classes according to their features. The most appropriate asset classes for your investment depend on the level of risk you are willing to take and the amount of time you want to keep your investment.

The following table illustrates the four main asset classes. As you can see, as the return levels rise, so too does the level of risk involved. 

Financial Planning

Factors to consider when making investment decisions

  • Investment risk – Different investments have different associated risks. Essentially, it comes back to you. How willing and comfortable you are to take the level of risk involved with the investment. Generally speaking, the higher the potential return, the higher the risk.
  • Investment timeframe – The longer you keep your investments, the harder your money will work for you. Although it may be disheartening to see your investments fall, history shows that long-term investments are generally rewarded over time.
  • Keeping to your financial plan – Remember the reasons why you started your investment portfolio and what you wanted to achieve from the investment.
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Golden Rules to investing

Below are some ‘Golden Rules’ to consider when making an investment decision. Before you make any decision you should consider your personal situation, personal goals and seek advice from a financial adviser.

  • Start early – With compounding returns even small amounts can grow considerably over time. The earlier you start and the longer you invest, the more time your investments have to grow.
  • Diversify – You can reduce the level of investment risk by spreading your money across different asset classes. Diversification means you’re not “putting all your eggs in one basket” and don’t have to depend on that one asset class working for you.
  • Monitor – You should monitor the performance of your investments on an ongoing basis.

How to invest

Before making a decision to invest it is recommended that you:

  1. speak to a financial adviser
  2. understand the investment and how it may benefit you; and
  3. understand how the investment operates and the associated risks.

 Then you can:

  1. make your investment choices; and
  2. complete the investment process. 

Speak to an expert

Getting financial advice isn’t just about the market. It’s about you and how you can stay in control of your investments during market changes and feel secure and confident about your financial decisions. Talking to a professional about your personal financial situation can help you learn more about the services and potential financial strategies that are available to you.

Contact Chan & Naylor Financial Planning on 1300 99 77 34 to book your complimentary consultation with a qualified Financial Planner to dicuss.Please note that this is not a Financial Strategic Consultation.

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General advice warning:

This information is of a general nature only and is not intended to represent investment or professional advice. This information does not take into account your individual objectives, financial situation and needs. You should assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision.


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