Investment Basics

AMP has shared with us this video that will talk you through investment basics. You can watch the video here or read the transcription below.

Hi, I’m Jeff. I’m in investment management with AMP, and I’m an investor in my personal life, too. Now, an investor is someone who buys an asset with the aim of creating an income, or holding onto it to grow its value in the future. And when you look at it that way, it’s quite possible that you are an investor already.

What kind of investor are you?

If you are a paid worker in Australia, chances are that you are putting money into a superannuation fund. And if your super fund has invested in shares, then really you are a share investor. And if some of that super is fixed interest, then you are a fixed interest or bond investor. Likewise, if your super is invested in property or even if you have a mortgage and you expect your property to be worth more when you sell it, then you are a property investor.

In fact, if you just have a bank account and that money is earning interest, then are investing in cash because you are leaving your money there, expecting it to be worth more, later. Those are the four main classes of investment; shares, fixed interest, property and cash.

How to buy an investment

Now – how to buy that investment. If you’re looking at shares for example, you can take a direct holding by just trading online or going through a broker. But normally you’re buying a smaller slice of the pie. What you could also do is go through a pooled or managed fund. So, for example, instead of buying Qantas shares here, Telstra shares there, you go into a managed fund and they may be able to trade in hundreds of different stocks. That also lets you diversify in an affordable way.

There are all kinds of managed funds. Apart from shares, you can use them to buy fixed interest investments, property, and cash, too. The fund can be within your super plan or outside it. The class of investment you choose really depends on your goals, and it’s important to get advice from a financial planner, so you can make those investments decisions that are right for you.

Identifying your goals

For me, I have two goals. My first goal is long terms, to have a comfortable retirement. My super investments are how I will achieve this. Now, there’s a lot of cynicism about super, but your super is your money. It’s not the government’s money, it’s not your employer’s money. It’s your money. And it’s my investment to help me reach my goal of funding my retirement. I’m in my 30’s. I salary sacrifice into my super. And in it, I’ve got a mix of Aussie shares, international shares, property, fixed interest, cash, and alternatives.

My second goal is medium term, to have some sort of passive income, one that I don’t actually have to work for. Now often, people look for a second job if things become tight. And it’s very taxing on an individual, especially on a family. So I want investments that will be able to give me an income during those times, where I may be out of work or moving to part time work, or just to give me that little bit extra.

To achieve this goal, I’ve got investment properties and managed funds, and some direct share holdings too. They’re just my goals. You have your own, but if it involves having more money in the future than you do now, talk to your financial planner about how investing could grow your wealth.

If you would like us to review your personal financial plan, please contact us for an initial consultation.