INVESTING
Thinking about investing? Investing is a way to accumulate wealth and save for longer-term financial goals. Here’s some tips to get you started.
Before you invest
Before putting money into any investment, you should be in a comfortable financial position, and able to answer a few basic questions:
Starting point
Before allocating cash to an investment, make sure you have:
- Repaid all short-term high-interest debt
- Kept some emergency funds in a savings or mortgage offset account
- Insured all your possessions you can’t afford to lose
- If you have a pet, consider pet insurance or increasing your emergency fund
How do you get money into the investment?
- Do you need the services of a broker or investment adviser?
- Do you need a share broking account?
- How do you put money into a direct investment?
- Can you add to the investment?
How will your money be used?
- This may be obvious for investments such as residential property, but perhaps not so obvious if you investing in a company or managed investment
- If you are investing in a specific company, what are they planning to do with your money?
- If you are buying into a managed fund or exchange traded fund (ETF), what is the fund doing with your money?
How long are you investing for?
- Investments in share and property markets are better suited to longer-term goals because markets can be volatile in the short term
- How will you feel if the value of your investment goes backwards?
- Is the timing of your goal flexible?
How easy is it to get your money out?
- Is there a minimum investment period?
- What is the expected timeframe for getting you money out?
- Is it possible to sell part of the investment? For example, you want to take profits from one investment and use them to buy into something different
What are the costs?
- What are the upfront costs?
- What are the ongoing costs?
- Does it cost you to cash out part or all of the investment?
- If there is a minimum investment period, can you get your money out early, and if yes, what are the penalties?
Investment types
The investment you choose might be determined by how long your money will be invested, your willingness to take on risk for potential higher returns, and your personal preferences. Here’s what you need to know.
Investing Quiz
Test your knowledge on the essentials of building an investing plan with this quick quiz! While it doesn't cover everything, your score will give you a solid sense of how well you understand the fundamentals. Whether you're just starting out or brushing up on your skills, this quiz highlights key considerations for ADF members. After completing it, you'll also get access to helpful resources to deepen your understanding and refine your investing strategy.
Frequently Asked Questions
1How do I get ready to start investing?
Before you begin investing, think about taking care of these basics:
- Pay off any high-interest debt
- Set aside emergency savings
- Protect your valuable possessions with insurance
- Consider whether you need personal insurance coverage
- Think about why you want to invest (what’s the purpose and timeframe?)
- Read our investing guide
2How can I invest in shares?
History shows that few people are able to make consistently sound decisions about share investing. There are several ways to invest in shares. If you want to invest directly it may help improve your results if you diversify by choosing shares in a range of companies, across different industries. Don't forget to do your research on the companies before you invest. You can also invest in shares through a managed fund or exchange traded fund (ETF). These are where your money is pooled with other investors and a professional fund manager chooses which shares to buy and sell on behalf of all the investors. This gives you access to a broader range of shares. Ongoing management fees vary (and must be disclosed). Some funds managers are 'active'. Generally, these funds attract higher fees due to the regularity of buying/selling and 'stock picking' designed to beat the share market index; while others are 'passive', generally with lower fees, that are designed to follow the share market index. You should be wary of claims by professional fund managers that they always beat the index. No one ever does that. See our investing guide for more information.
3Is it better to invest in shares or property?
While both are classified as ‘growth’ investment assets, property and shares are very different. A property is a physical asset, a share is part ownership of the company you invest in. Both have historically good long-term returns, however shares require a much smaller up-front investment which are usually 'liquid' (easily sold), and don’t have the high buying and selling costs that a property does. A residential property has the obvious advantage of giving you a roof over your head. You can also invest in either through listed or unlisted managed-style investments, such as managed funds, exchange traded funds (ETFs) and Australian Real Estate Investment Trusts (A-REITs). See our investing guide for more information.
1How long should I plan to keep my money invested?
Consider these factors when deciding your investment timeframe:
- Your financial goals and when you'll need the money
- How comfortable you are with market ups and downs
- Whether your plans might change and you'll need flexibility
2What should I invest in?
The investments which are appropriate for you depend on a range of factors including your goals, your attitude to risk, your investing timeframe and the other investments you already hold. There’s a lot to consider. See our investing guide for more information.
3What are the chances of losing my money if I invest in shares?
All investments carry some risk. Ordinary shareholders in a company will often lose their money if the company fails and goes into liquidation. A common method investors use to reduce the risk of losing their money is to ‘diversify’. A simple example is rather than investing all your money in one company; if you were to invest in ten companies the risk of all your investments failing reduces. For further information see our investing guide.
