The Australian share market is a daunting place for newcomers to share investment. We all hear war stories of the great crash of '87 and the market falls during the GFC aftermath. Many individual investors are concerned they are going to lose all of their money. The share market, when managed appropriately, is a great place to get exposure to higher long-term returns and bring great diversification to an investment portfolio. Here are some tips to get started.
Fixed interest is a defensive asset class that most investors should have some exposure to.
Fixed interest investments offer investors a regular income for a specified term with the expectation that the principal will be repaid at the end of the term, otherwise knows as the maturity date.
Fixed interest investments are usually issued by corporations, government and semi-government bodies and financial institutions such as banks to raise funds.
Examples of fixed interest investments include:
The challenge with fixed interest investment, especially the lower risk government bonds, is that they are usually offered in high value lots. If you only want to get say $20,000 worth of diversified exposure then you are out of luck.
This is where a managed fund comes to the rescue. Investing in managed funds for fixed interest makes a lot of sense. You get the benefits of pooled funds - plenty of diversification across multiple fixed interest assets plus the benefit of a professional fund manager looking after it.
Another option is an exchange traded fund (ETF) which invests in fixed interest. This is similar to a managed fund except that you buy and sell on the ASX.
Talk to us about how you can use a managed fund to add the fixed interest asset class to your portfolio.
The information provided is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. You should consider whether the information is appropriate to your needs and seek professional advice from a financial planner before making any investment decisions.
Mark Sinclair is the principal planner at Sinclair Wealth Services