Investing is a great way to grow your wealth over time. However, with so many investment options available, it can be challenging to determine which investment is right for you, how much you should apportion to your investments, whether to fix or not fix your interest rate and how the current cost of living crisis affects these decisions.
In this article, we will unpack these scenarios and offer you an investment checklist that will help you work out which type of investment is best for you.
How do I choose the right investment options?
To determine the right investment options for you, it is important to consider how much of your earnings you want to apportion towards them.
This depends on your financial situation and short-term and long-term investment goals and finding the balance between investing for the future and meeting your current financial obligations and lifestyle needs.
Based on this information, you will need to investigate investment returns based on your financial goals and which are the best high-yield, low-risk options that will suit your budget.
To fix or not to fix
Fixing your mortgage rate can provide stability and predictability in your mortgage repayments, as your interest rate will remain the same for a fixed period of time.
On the flip side, fixing your mortgage rate can also mean missing out on potential interest rate drops, which could save you money in the long run.
In the current economic climate here in Australia, based on the ninth rate increase in as many months, experts suggest that fixing rates is less wise.
With the current cost of living at the highest it’s been year-on-year in over three decades, we advise you to keep an eye on the market predictions and weigh the pros and cons of fixing your mortgage rate before making a decision.
The best suggestion would be to consult with your financial advisor before signing on the dotted line.
Our choosing investments checklist
Take a look at our choosing investment checklist that will guide you through the selection process that considers your personal financial circumstances and investment goals.
Determine your investment goals and risk tolerance
Some questions to ask before investing are:
What do you want to achieve from your investment?
Are you looking for long-term growth or regular income? What level of risk are you willing to take?
Once you determine your investment goals and risk tolerance, you can better evaluate investment opportunities.
Research investment options
It is essential to research different investment options before making a decision.
Some common investment options in Australia include shares, property, managed funds, and bonds but each investment option comes with different risks and potential returns.
You can better evaluate the investment opportunity by researching and understanding the risks and returns. Here are some high-yield investment options to consider.
Evaluate the fees and costs
Investing comes with fees and costs, including brokerage, management and transaction costs.
These fees can eat into your investment returns over time, so evaluating the fees and costs associated with the investment option you are considering is essential.
Diversify your investment portfolio
Diversification mitigates risk by ensuring that when one of your investments may not be performing well, another will.
Consider tax implications
Investments can have different tax implications, depending on the investment type and structure. It is critical to consider any tax implications before investing.
Here in Australia, for example, capital gains tax is applicable on the sale of an asset such as an investment property or part, or all, of a share portfolio. If you have held the asset for longer than 12 months, you can receive a 50% discount on this tax, but this will need to be considered.
Monitor your investments regularly
This is vital and is where a financial planner is invaluable!
You must monitor your investments regularly to ensure they are performing as expected.
Regular monitoring also helps you to identify when to sell an investment or make changes to your investment portfolio.
By making informed and strategic investment decisions, you can grow wealth and achieve your financial goals over time.
If you would like to speak to one of our financial planners to help you work out which type of investment is best for you, contact us to make an appointment.