- living in retirement
- financial planning your retirement
- managing life’s risks
- getting ahead financially
There are so many options and information on how to build wealth (thank you internet) that most of us are uncertain as to the best way to go about it.
We find that most people usually just want to make the most of what they have, avoid mistakes and take advantage of opportunities. And, of course, make money, so they can create the life they want.
Deciding on the right financial path for you and determining the right balance of investments is not always easy. A good financial adviser can help you understand the options, avoid costly mistakes, make smart choices and help you stay on track.
what will work for you?
The strategy that’s best for you will depend on your financial goals, the amount you have to invest and your attitude to risk. It might also depend on your values and attitudes to money.
A diversified approach to creating wealth ensures that your risk is spread across different opportunities. This means that if the bottom falls out of shares (like what happened during the Global Financial Crisis) and you have investments in property and bonds in addition to shares, you’ll be better off than those who are only invested in shares as your investments are spread across a range of asset classes.
Here’s a brief rundown of the pros and cons of some of the most popular investments and wealth creation strategies.
Similar to a savings account, but you commit to locking your funds away for a set period, and the interest rate is fixed at an agreed level for the same period. Similarly to a fixed or variable rate mortgage, whether you end up getting a better deal with a fixed term deposit than a normal savings account depends on the activity of the market.
Pros: safe, reliable
Cons: slow growth, penalties for early withdrawals
Superannuation has always been a tax-effective vehicle for retirement savings for most Australians, and now that superannuation retirement income is tax-free for the over 60s it’s even more attractive for investors who are happy not to access their cash until retirement.
Your superannuation balance can be invested in the same sorts of assets that you can invest in outside of superannuation (ie shares, property and fixed interest) depending on your risk preference. Bear in mind that there are now tight limitations on how much you can contribute each year, so now more than ever it pays to plan ahead.
Pros: very tax-effective, potentially high returns, long-term potential, tax effective retirement income
Cons: it’s locked away until retirement
Some swear by home ownership, arguing that borrowing to buy a home and then paying off your mortgage as soon as possible is the best option for secure wealth. Property has generally been a solid investment, but carries associated costs and upkeep.
Pros: Own more equity; savings discipline; property grows in value over the long term
Cons: Can’t easily be converted back to cash; high transaction costs, large initial outlay, on-going maintenance costs
With shares you can invest in all the companies listed on the Australian Securities Exchange. Online direct broking services can provide a cost effective way to manage your own share portfolio. You can also opt for managed funds – where your money will be pooled with that of other investments to increase your buying power and diversification. Managed funds are also an easy way to access international share markets.
Pros: potentially high returns, tax advantaged income, normally does well over very long periods, usually easily converted to cash
Cons: carries moderate to high risk, ease of selling means that prices can be volatile