Smart Tax-Effective Investing

Whether you are an experienced investor or a beginner, there are plenty of steps you can take to grow your money and keep it safe. The most common types of investments used by Australians – shares, managed funds, managed account, ETF’s, international investments and property.

Don’t rely on good luck. Instead, take the time to consider your investment goals, investment to align with your needs and objectives.

Here are our tips to put you on the path to investing smarter.

If you’re planning to invest, there are a few steps to take before you jump in. Preparation is the key to success. Make sure you’re ready to invest by checking you have:

  • your debts under control
  • enough cash for emergencies
  • adequate insurance protection.

If you have a financial goal in mind, it will be easier to develop an appropriate investment plan. Think about what you want and why, and set a time frame to achieve each goal. Then you can measure all investments against your plan.

While your investment goals are very important, you should also consider investment risk when you’re investing.
A good way of managing risk is to spread your money between different asset classes such as cash, fixed interest, property and shares. This is known as diversification or not putting all your eggs in one basket. Diversification will leave you less exposed to a single economic event, so if one business or sector you’ve invested in fails or does badly, you won’t lose all your money.
If you are borrowing money to invest then you are taking even more risk if your investments fail. Before you jump into any investment, carefully assess its suitability.

Here are some other things to consider before you hand over your money.

If protecting your capital is important, then you need to find out where you stand if something goes wrong with the investment.

  • Check for back end fees
  • Look for investment solutions that allow you to access your money when you need it.
  • If you know what your money will be used for, you will be better placed to decide how risky the investment is and whether you’re comfortable putting your money into it.

What About Tax?
An investment is ‘tax-effective’ if you end up paying less tax than you would have paid on another investment with the same return and risk. While lower tax can help your savings grow faster, you should never base an investment decision on tax benefits alone.

Don’t Panic
Market and economic conditions can change rapidly – but a rushed reaction can often make things worse. Some investors try to time the market and fail. If your strategy is sound, and the investment is long-term, stay with it.

Avoid Scams
Investment scams are often so professional, slick and believable that it’s hard to tell them apart from genuine investment opportunities

Equity In Your Home

If you would like to purchase an investment property without putting yourself at financial risk, using some of the equity available in your home may be the way to go.

View this short video to understand how much you can borrow for an investment property and the factors you need to consider.

Managed Funds

If you have considered investing as a source of income but would rather leave the investment decisions to a trusted professional, then a managed fund might be the best option for you.

But, what is a managed fund? Run by an investment manager, your money is pooled together with that of other investors, and the manager buys or sells shares and/or assets on your behalf and provides you with a paid income periodically.

Watch this short video to find out about the advantages of a managed fund, including the ability to invest in a wide range of markets with a relatively small amount of cash, and a reduced paperwork burden.