More information - Investing
General information about investing
Finding advice
Comparing product features
You can find out about interest rates, fees and other features of managed funds and some other investment products from comparison tables published in a number of magazines and newspapers and on the internet. For example:
Product disclosure statement
If you are recommended or offered a financial product, you should be given a Product Disclosure Statement. This should tell you clearly and concisely:
- features of the product
- fees or commissions that may affect your returns
- the benefits and risks of investing
- information about complaints handling and cooling-off rights
- other information that is material to your decision to invest
Visit the website of the Australian Securities and Investments Commission for details.
Tax
Contact the Australian Taxation Office to find out more about the taxes you may have to pay on your investments.
On-line seminars
There are many useful on-line seminars that can help with investing. The ASX is a good place to start.
If there's a problem
If you think you've paid fees you shouldn't have or have some other problem with an investment product, contact your financial service provider and explain the issue.
If you're not able to resolve the problem directly with your service provider, there are a number of organisations you can go to.
The Australian Securities and Investments Commission has information and contact details.
The Banking and Financial Services Ombudsman deals with complaints about financial services providers including banks, foreign exchange dealers, deposit takers, credit providers, mortgage brokers, and some insurance and investment providers.
The Credit Ombudsman Service deals with complaints about individuals and companies that operate in the credit industry and are members of the service.
The Credit Union Dispute Resolution Centre deals with complaints about credit unions that are members.
The Financial Co-operative Dispute Resolution Scheme deals with complaints from consumers about those Australian credit unions and building societies which are members of the scheme.
The Financial Industry Complaints Service deals with complaints about financial services providers including life insurers, funds managers, investment advisers and planners, stockbrokers and some superannuation providers.
Asset classes
The four main asset classes are cash, bonds, shares and property.
Cash
The term 'cash' refers to assets that can be readily converted to cash with little risk of capital loss. By definition, cash usually means notes and coins, however, it can include short-term investments such as cash management accounts and short-term deposits.
Cash produces income rather than capital growth. It is considered a low-risk investment because it is unlikely to decline in value and will pay a regular income. However, it is likely to produce lower returns than other asset classes and any positive return is taxed at your marginal tax rate.
Bonds
Bonds are fixed interest securities issued by governments and by financial institutions and corporations.
Fixed interest securities earn interest at a set rate over a determined period. Interest rates differ depending on the term and the issuer. The most common interest-bearing securities traded in Australia are Commonwealth Treasury bonds and notes, semi-government bonds, indexed bonds, corporate bonds, mortgage and asset backed bonds, and company bonds.
Shares
Shares provide both capital growth and income. Most shares held by retail investors are listed on the Australian Stock Exchange (ASX), which provides a regulated marketplace for the listing and trading of shares.
When you buy shares in a company, you buy part ownership of that company. This then entitles you to a share of the profit distributed by the company which is called a dividend. Dividends are expressed as an amount per share, for example, 20 cents per share. The amount and timing of the dividend can fluctuate from year-to-year at the discretion of the directors of the company.
You can buy shares yourself through a stockbroker or you can own them indirectly by buying units in a managed equity fund.
Property
Like share investments, an investment in property is an equity investment involving ownership, variable income and capital growth.
Over the longer term (10 years or more), property has historically produced higher returns than fixed interest investments, but lower returns than share investment. The rate of return per annum on an income-producing property can vary, typically between 2% and 15% of the value.
Return on all types of property can provide capital growth as well as income (or yield), if the property is available for rent or lease. Short-term fluctuations and cycles do occur and the level of growth, or capital appreciation, varies between property types and locations. Tax is a major consideration for property investors.
The most common type of property available for investment is residential (houses and units) as either owner-occupied or investment properties. In the case of owner-occupied residential property, you can only gain from capital growth if property prices increase, however any profit made when the property is sold is not subject to capital gains tax. On the other hand, residential investment property can potentially benefit from both capital gain and income from rent. However, when selling, if a profit has been made, an investment property is subject to capital gains tax.