Investment Planning

Investment Planning types

While the benefits of investing are widely known, choosing how to invest can be difficult. Different types of investment are suited to different people depending on their personal circumstances, goals and experiences.

Probably the largest determinant of how an individual invests is their appetite for investment risk. The following graph shows how higher returns are generally associated with higher risk.

It is also important to note that a well diversified portfolio including a range of assets can actually reduce the overall risk in your portfolio.

It is very unlikely that you will be able to save your way to a secure retirement – you must invest somewhere. The greatest risk of all is to not invest. Prudent investment of your savings into an appropriate selection of assets can provide the extra return that you need.

A professional financial planner is ideally positioned to help you determine what mix of investment types is best suited to you, after taking into account your time frames, objectives, needs and attitude.

Download our information sheet on Investing Using Dollar Cost Averaging.


Australians have a well documented fascination with direct property and home ownership. From the early days of migration, the dream of owning the quarter acre block, with room to kick a footy and a space for the BBQ to gather around with friends, has long been held. That dream was expanded further still throughout the 1990’s with the increasing popularity of using direct property to increase personal wealth, much of which was driven by the major banks (which loosened the purse strings and relaxed the lending criteria to increase their loan books). At one point it seemed virtually everyone had an investment property! Whilst it is true that many have been able to set themselves up using this asset class alone, there are just as many examples of horror tenants or the nightmare neighbours which crushed many dreams. As with every asset class, there are risks which any investor should be aware of…..

Whilst history has shown property to be a good investment, directly investing in the property sector through residential or commercial property purchases is only one way to have investment exposure in property. For example, you can achieve indirect access to the property asset class through investment in a listed property trust (LPT).

Direct property investment can provide you with a stable income stream through the rental income charged. It can also provide you with strong tax concessions as you may be able to benefit from negative gearing strategies. Key limitations of direct property lie in its lumpy performance nature and in its funding, as a large amount is required to make an investment.

A listed property trust (LPT) is a collective investment vehicle that sees individuals pool their funds together to invest into a professionally managed portfolio of diversified property assets. Some of the benefits associated with investment through listed property trusts include:

  • Diversification – As your funds are combined with those of other investors you will effectively have a larger asset base, allowing you to spread your investment across different geographic locations and property sectors (e.g. commercial, residential and industrial).
  • Liquidity – It is much easier to sell your LPT investment than it would be to sell a residential or commercial property. In addition, you can choose how much of your investment you wish to sell and whether you wish to retain a certain portion.
  • Professional Management – LPTs are managed by skilled and experienced experts who are able to determine the best value investment.
  • Lower Ongoing Costs – The ongoing cost of maintaining an LPT is lower than if you invested directly in a residential or commercial property (where you would be required to pay water rates, land tax, council fees etc).

Reliability of income due and diversity of tenancy should also be considered, especially in relation to commercial property, where it can be very hard to find a tenant.

The choice of whether to invest directly or indirectly in property will vary depending on individual circumstance. As such, we suggest you contact your financial planner to discuss your investment options and determine whether property investment is appropriate for you.

Australian shares

Investing in shares provides you with ownership rights in a company. You may decide to invest in either Australian shares or international shares. Australian shares are listed on the Australian Stock Exchange (ASX).

The returns that are made from investment in Australian shares come from two different sources:

  1. Dividends.
  2. Capital Growth.


Dividends are payments that are made by a company to its shareholders from their profits. The majority of Australian shares make two dividend payments each year; an interim dividend and a final dividend.

The dividends that are paid also carry with them the potential for a high degree of tax effectiveness. When a company has already paid tax on their profits prior to the payment of a dividend, investors may claim a tax credit for this amount. This tax credit is known as a ‘franking credit’ and it can be used to offset your personal tax liability.

Capital Growth

Capital growth is the difference between the current share price and the price at which you purchased the security. The capital gain you make will not be realised until you decide to sell the shares. Australian shares are likely to experience some capital volatility, especially in the short-term, which could result in possible negative returns and capital losses.

An advantage associated with investing in Australian shares is that they can be purchased in small parcels and you do not require large amounts of capital to invest.

Furthermore, you do not have to invest directly in shares as there are managed funds whose investments offer exposure solely to Australian shares. These are known as sector specific funds and for a small outlay you will be able to achieve diversification and professional management.

We suggest you speak with your financial planner to discuss appropriate time frames and anticipated returns.